· Pakistan Bureau of Statistics released its monthly exports and imports numbers for the month of Aug’22. The new PBS data showed country’s imports growing 22%MoM to US$6.1bn while the exports posted an uptick of 10%MoM to clock in at US$2.5bn. Resultantly, the trade deficit grew 31%MoM to clock in at US$3.6bn.

· Country’s oil and food imports posted double-digit growth during August and contributed close to half of the country’s total imports. Oil imports increased by ~30%MoM to US$1.9bn while food imports jumped by ~34%MoM to US$1.0bn as the impact of floods in the country start impinging its CAD.

· In May’22 GoP implemented a ban on imports of various items in order to arrest the slump in currency. However, more recently, government decided to reverse the ban which has again started to put significant pressure on the currency.

· With floods hitting agriculture output of the country, the local demand will have to be met through imports. Consequently, the import bill, especially the imports of food items, will likely remain elevated over the foreseeable future. We earlier revised our CAD estimates for FY23 from US$9bn to US$11.5bn—US$12.0bn.

· With anticipations building about the Fed raising interest rates by 50bps to 100bps in the next meeting, US$ will likely remain strong against global currencies. As for PkR, this will be a double whammy owing to local currency’s own frailties. Resultantly, we expect PkR to remain under pressure over the next few month. From the vantage of equity markets, the weak currency will continue to spoil investor sentiments. The IT sector, with its US$ denominated revenues will likely outperform the market. 

Courtesy – AKD Research