KARACHI – Being cheered by strong growth in exports during eight months of the current financial year, the country’s economic managers also may like to keep an eye on the shipping freight on exports that fluctuates in accordance with international oil prices.
It is feared that increasing political unrest in the oil-rich Middle Eastern and North African (MENA) region will give impetus to rising international oil prices with Brent crude and New York light sweet crude standing, respectively, at $115 and $104 per barrel.
Provisional data of the State Bank of Pakistan (SBP) reveals that during July-February FY11, national export receipts remained on the higher side at $15.453 billion against $12.493 billion during the last corresponding period. It is indicated that exports fetched over $2.96 billion or fetched 24 percent more dollars for the country than eight months in the last fiscal year.
At the same time, the Pakistan exporters paid more to international shipping lines for transporting their cargo to various destinations abroad. The central bank’s calculations show that during July-February of the current financial year, local exporters paid over $38.77 billion under the head of freight on exports.
Shipping freight on exports during the last corresponding period amounted to $ 25.92 billion, exhibiting an upsurge of $ 49.5 percent or $ 12.85 billion, according to SBP data. According to traders, the apparent raise in the shipping costs was because of increasing international oil prices.
“Shipping freights increase in accordance with oil prices in the global market,” Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Vice President Khalid Tawwab, told Pakistan Today.
The trader said there was no specific rate-fixing formula for calculating the cost of transportation of cargo to any destination. “The shipping lines charge various freights to various destinations on their own,” he added. Citing other possible reasons for hike in the transportation cost of exports, the FPCCI vice president said remarkable growth in terms of exports could also push upward the size of freight payments.
A leading exporter of textile products, which constitutes 60 percent of the country’s exports, also cited international oil prices as a reason for increasing shipping freight. “Sea freight increases for two reasons. Firstly, fuel (oil prices) and secondly problems of insurance,” said Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) former Chairman Mohsin Ayub Mirza. The exporter went on to say that other factors like ‘unnecessary’ charges at the local ports were also being ramped up to the cost of exporters.
“The exporters have long been at odds with the State Bank over various unnecessary charges at local seaports like Terminal Handling Charges,” Mirza pointed out. With the country’s exports and worker remittances set to hit the record mark of $22 billion and $11 billion mark by the end of this fiscal, economic planners see the country’s external accounts posing no threat of default on the balance of payment side ‘at least’ during the remaining two months of FY11.
