The State Bank of Pakistan does not expect Pakistan's export to recover strongly in the near future due to exogenous factors, as well as domestic structural problems. Giving a detailed analysis in the Third Quarterly Report, SBP feels that all the relevant stakeholders need to sit together and "formulate mutually consistent trade and industrial policies of the country. The role of Ministry of Commerce, Ministry of Industry, Planning Commission, Board of Investment, Engineering Development Board and TDAP has become increasingly important."
The report says Pakistan's exports are geographically concentrated in the EU and the US. So far, Pakistan's exports in the EU are intact, despite a fall in EU imports especially value-added items like knitwear and woven garments. This was mainly attributed to GSP Plus status, which allowed Pakistani exporters to cut through other exporters' share. Though, exports to other markets have fallen, the report adds. It remains to be seen, says SBP, how the Eurozone economy responds to ECB's liquidity injections. Euro has begun to recover from its recent slump. "It has gained over 8 percent against the US dollar, since it bottomed-out in mid-March" Federal Reserves' indecisiveness over interest rates and the recent unemployment numbers were key factors in weakening of the US dollar in April-May. US economy has contracted, because the strong dollar not only weighed on exports, but also hit corporate profits.
SBP says China is a major buyer of Pakistani cotton, and its product (yarn and fabric). Chinese demand for cotton products has been declining as it faces a slowdown in its high value-added products to the EU. However, Pakistan's share in the Chinese market has risen. Cotton yarn exports in terms of quantum remains at last years' level but lower unit price has pushed down the value of Pakistan's exports. Further, says the report, India and Vietnam have increased their market share in US market eroding Bangladesh's share which fell by 1.6 percent in the US market. As a result Bangladesh has imported less quantity of fabric from Pakistan.
RICE: Overall rice exports have declined sharply in July-March 2015 because Pakistani basmati cannot compete with Indian Basmati on marketing grounds, says the report. More specially Pakistani basmati export to the UAE have declined 26.4 percent yoy in July-February 2015. Due to a slump in global prices non-basmati rice came down in value terms but not in quantity. However, the report warns Pakistani exporters to remain vigilant as Thailand is gradually firming up its export orders.
JEWELLERY: SBP report attributes a fall in Jewellery exports due to a decline in gold imports mainly due to restrictions imposed to curb smuggling of gold to India and reduce burden on the kerb market of forex. The Cap imposed on monthly quantum of gold imports vide SRO 328(1)/2014 by Ministry of Commerce and on volume of a single transaction and restriction to export within 180 days of gold import-jewellery made thereof be exported. SBP report notes that 80 percent of the value consists of gold in the jewellery is exported.
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