Trade: more of the same

With three quarters of the year gone, the balance of trade remains more of the same: up tick in exports that do not compensate for the increase in imports in absolute numbers or percentage terms or in sustainability.

That the nearly $2 billion YoY increase in exports for 9MFY18 was fueled mostly by increase in food and textiles comes as no surprise. Food exports were driven by wheat and sugar subsidies, and an opportunity to cash in on the EU market that banned Indian rice exports due to certain chemicals used in fertilizers by our neighbours. Barring the last month, improvements in the country’s energy situation, and the export promotion package propped up textile exports while devaluation of the rupee helped across the board.

The over looked and under supported sectors of chemicals, leather goods such as gloves and footwear, plastics, and surgical goods & medical instruments witnessed double digit growth. These sectors encompass a range of value added goods rather than concentrate on primary and resource goods that Pakistan tends to focus on to protect its agricultural sector, and hence the vote bank. While investments in these sectors could diversify the export portfolio and promote sustainable growth, lack of lobby power continues to consign these sectors to the shadows.

Increase in imports YoY stand at $6 billion, three times that of the increase in exports, with petroleum and gas accounting for more than half of it. While the increase in exports is more of the ‘band aid’ kind rather than sustainable for the long term, increase in imports indicate their continuous upward trend.

Lack of international competitiveness, absence of cascading tariffs, meagerness of import substitution policies and/or export oriented policies, need for political stability and consistency, dearth of economies of scale, paucity of productivity and efficiency, unfriendly government regulation, you can take your pick for the reasons behind the prevalent current account deficit. Most of these challenges are ones that the industry has faced since Pakistan’s inception in one form or another and hence trade, till the end of the current government’s tenure at least, is expected to be more of the same