AGL 40.00 Decreased By ▼ -0.01 (-0.02%)
AIRLINK 127.00 Decreased By ▼ -0.99 (-0.77%)
BOP 6.68 Increased By ▲ 0.08 (1.21%)
CNERGY 4.49 Decreased By ▼ -0.11 (-2.39%)
DCL 8.60 Increased By ▲ 0.12 (1.42%)
DFML 41.30 Decreased By ▼ -0.18 (-0.43%)
DGKC 86.71 Increased By ▲ 0.13 (0.15%)
FCCL 32.16 Increased By ▲ 0.02 (0.06%)
FFBL 64.70 Decreased By ▼ -0.72 (-1.1%)
FFL 10.29 Increased By ▲ 0.04 (0.39%)
HUBC 109.51 Decreased By ▼ -0.98 (-0.89%)
HUMNL 14.90 Increased By ▲ 0.15 (1.02%)
KEL 5.05 Decreased By ▼ -0.08 (-1.56%)
KOSM 7.40 Increased By ▲ 0.28 (3.93%)
MLCF 41.39 Decreased By ▼ -0.26 (-0.62%)
NBP 60.60 Increased By ▲ 0.51 (0.85%)
OGDC 190.00 Decreased By ▼ -4.69 (-2.41%)
PAEL 27.81 Decreased By ▼ -0.14 (-0.5%)
PIBTL 7.75 Decreased By ▼ -0.25 (-3.13%)
PPL 149.75 Decreased By ▼ -1.42 (-0.94%)
PRL 26.73 Decreased By ▼ -0.15 (-0.56%)
PTC 16.18 Increased By ▲ 0.18 (1.13%)
SEARL 86.02 Increased By ▲ 7.82 (10%)
TELE 7.72 Increased By ▲ 0.33 (4.47%)
TOMCL 35.58 Decreased By ▼ -0.09 (-0.25%)
TPLP 8.14 Increased By ▲ 0.23 (2.91%)
TREET 16.51 Increased By ▲ 0.62 (3.9%)
TRG 53.35 Increased By ▲ 0.59 (1.12%)
UNITY 26.28 Decreased By ▼ -0.27 (-1.02%)
WTL 1.26 Decreased By ▼ -0.01 (-0.79%)
BR100 9,889 Decreased By -31.1 (-0.31%)
BR30 30,611 Decreased By -140.9 (-0.46%)
KSE100 93,355 Increased By 130.9 (0.14%)
KSE30 28,931 Increased By 46 (0.16%)

EDITORIAL: Notwithstanding repeated claims of success in curtailing the danger posed by the 20 billion dollar historically high current account deficit inherited by the Khan administration, of which the trade deficit is a significant component, trade deficit July-September 2020 is higher than the comparable period of the year before - at negative 5.8 billion dollars against negative 5.6 billion dollars. The rise in trade deficit reflects a marginal decline in exports – from 5.5 billion dollars in July-September 2019 to 5.47 billion dollars in the comparable period of this year while imports rose from 11 billion dollars to 11.3 billion dollars.

In July-September 2018, the trade deficit registered negative 8.7 billion dollars with imports of 14 billion dollars and exports of 5.3 billion dollars. Unfortunately, the decline in imports from 14 to 11 billion dollars between July-September 2018 and 2020 reflects more a decline in the international price of oil, Pakistan’s major import item, as well as a decline in import of raw materials and semi-finished products (due to an extremely harsh contractionary monetary policy reflected by 13.25 percent discount rate and an unprecedented erosion of the internal and external rupee value) that led to negative large scale manufacturing growth with a subsequent negative impact on Gross Domestic Product (GDP).

What must be of serious concern to the Ministry of Commerce at present is the fact that the European Union has agreed on a Free Trade Agreement with Vietnam which is projected to have a major negative impact on our exports to the EU especially after Pakistan’s GSP status expires in 2023. Analysts argue that since buyers place their orders a year or so in advance Pakistan’s exports to the EU would decline significantly by 2022. There are emerging political lacunae in the way of successfully seeking either an extension of the GSP Plus status or a request for Least Developed Country status after the EU criticism of alleged victimization of members of the opposition as well as Pakistan’s recent principled stance with respect to Islamophobia displayed by the French President. Be that as it may, one would hope that the government can successfully resolve all outstanding issues through talks.

There have been some months when the Advisor to the Prime Minister on Commerce Razzak Dawood has claimed a rise in exports, a desired form of earning foreign exchange for any country, however as the above data indicates they have not been sustained. The linkage between exports and an undervalued currency has not been evident in Pakistan given that since late 2017 the country’s economic managers have been reversing the flawed policy of the then Finance Minister Ishaq Dar to support an overvalued currency. The Khan administration has taken some measures to incentivise exports, including cheaper credit, lower taxes and provision of cheaper electricity to exporters; however, these measures are being opposed by the Finance Ministry on the grounds that they would compromise reaching a staff-level agreement with the International Monetary Fund (IMF) which, reportedly, is insisting on full cost recovery of the energy sector as well as very limited subsidies.

So what is the most appropriate way to boost our exports? The government must focus on import substitution policies while ensuring that raw material and semi- finished products’ imports remain unaffected. The government would do well to emulate the successful export promotion policies in Vietnam where export processing zones do not have a land price tag well above the market rate nor a ‘bribe’ for a utility connection over and above the fee.

Copyright Business Recorder, 2020

Comments

Comments are closed.