EDITORIAL: Exports during July-June 2024 surged to 30,645 million dollars against 27,724 million dollars the year before – a rise of 10.54 percent in dollar terms. Two observations are critical.
First, last fiscal year’s total export figures were an outcome of the flawed economic policy by the then federal government to artificially control the rupee-dollar parity (with reserves at less than 3.5 billion dollars), thereby giving rise to multiple exchange rates which, in turn, prompted the International Monetary Fund (IMF) to refuse to reach a staff-level agreement on the ninth review under the ongoing Extended Fund Facility programme.
Incidentally, this inane policy also led to a shrinking of the remittance inflows by 4 billion dollars in 2022-23 as Pakistani remitters opted to return to the illegal hundi/hawala system which had de-mobilised after the pandemic.
In fact, 2021-22 maybe a more appropriate year for comparative purposes wherein exports peaked at 32,492 million dollars, which is a decrease of 6 percent in 2023-24.
And second, the rise in exports was not in value-added items - limited in Pakistan to those that rely heavily on farm outputs as their major inputs; for example textiles, carpets, leather products/sports goods - but vegetable products whose exports rose from 2.9 billion dollars July-May 2023 to 5.06 billion dollars in the comparable period of 203-24 – a rise of 74 percent.
Within this group, cereals witnessed a 75 percent rise in exports followed by oil seeds and oleaginous fruit by 105 percent rise, and edible vegetables a rise of 152 percent. Other export groups, including textiles, raw hide and skins, leather, and mineral products registered a decline.
One may assume that exports of these vegetable items would have no doubt contributed to the high inflation that continues to persist to this day.
The good news is that the trade deficit has shrunk from 27.4 billion dollars July-June 2023 to 24.089 billion dollars in the current year – a decline of 12.32 percent – a decline on the back of a larger increase in exports - a total of 2921 million dollars during the two years - and a decline in imports of 464 million dollars.
While imports were not as suppressed in 2023-24 as during the previous two years yet they may explain why large-scale manufacturing sector, dependent on imported inputs, registered a growth of plus 0.45 percent only in July-May 2024 against negative 8.77 percent in the comparable period of 2023 as per the Economic Update and Outlook June 2024.
It is important to note that farm output continues to be heavily dependent on weather conditions and with Pakistan recognised as a country, which is particularly susceptible to the vagaries of climate change vegetable exports should not be relied on as a major source of export revenue. This is, therefore, no time for complacency; it is about time the government looked at the composition of exports critically and developed an export sector dedicated to high value-added exports, which are not as dependent on domestic farm output for their key input.
Copyright Business Recorder, 2024
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