The government has claimed in the Economic Survey 2013-14 that external sector performance witnessed a mixed trend during the current financial year. While export growth remained moderate in line with the global trends, the import bill recorded a nominal growth.
The Economic Survey's chapter "Trade and Payments" reveals that overall external account remained surplus considerably during the current year on the back of capital and financial accounts performance and the inflows from multilateral and bilateral financial institutions, friendly countries and issuance of sovereign bonds. This has been achieved despite the fact that Pakistan has repaid a huge amount against its international obligations. The depreciation of currency and depletion of foreign reserves which was observed during the first two quarters of current year have been well controlled with a net result of appreciation of currency and satisfactory reserve level when compared with end June, 2013.
The government expects the on-going trend to continue during the rest of the year and all the targets of external sector will be achieved. Pakistan's balance of payments (BoP) shows a record increase in capital flows that has substantially offset a gradual widening of the current account deficit during the current financial year. External account turned into surplus during Jul-April, FY14 compared to the same period of last year. Overall external account balance posted a significant surplus of $1,938 million during July-April FY14 compared to a deficit of $2,090 million in the corresponding period of last year due to a significant improvement in the financial account after realisation of floating of Pakistan sovereign bond inflows. This relative improvement has offset the deterioration in the current account deficit that reached US $2,162 million during July-April, FY14 compared to a deficit of US $1,574 million in the corresponding period last year.
The higher current account deficit was largely caused by the widening of trade and services account deficits. Specifically, higher services account deficit was the result of lower receipts under the Coalition Support Fund during July-April FY14, compared to the same period of last year. However, the current account (CA) deficit improved after the receipt of a CSF amount of $375 million.
The CA deficit gradually widened during the current financial year (July-April) to $2,162 million (0.9 percent of GDP) from $1,574 million in July-April, FY13 (0.7 percent of GDP). A striking feature of this year's current account deficit is that it has widened even though the import growth has slowed to 1.2 percent only but the performance of exports has remained slow, resulting in widening of trade deficit. A deficit in services account also widened manifold due to non- transfer of CSF and as such even a robust growth of 11.5 percent in current transfers (net) could not narrow the current account deficit.
Unlike the current account, the capital and financial account improved and turned into a surplus amounting to $4,998 million during July-April, 2013-14 as compared to a deficit of $440 million in the corresponding period last year. Notwithstanding a higher surplus in the capital and financial account, the overall external balance of the country witnessed a surplus of $1,938 million during July-April 2013-14. This improvement in Capital and Financial account comes from realisation of sovereign bond amount, grants from friendly countries and disbursements from multilateral and bilateral international financial institutions. This improvement in the Capital and Financial account balance enabled the overall external account balance in surplus.
Like previous year's performance, workers' remittances registered a commendable growth during July-Apr FY14, growing by 11.5 percent against 6.4 percent growth recorded in the corresponding period of last year. Overall exports recorded a growth of 4.24 percent during first ten months of FY14 (July-April) against a growth of 4.23 percent in the same period of last year. In absolute terms, exports have increased from $20,143 million to $20,997 million.
The 10-year GSP plus status for Pakistan by the European Union will revive industrial sector of Pakistan and create thousands of new jobs for the people. However, there are many challenges being faced by Pakistan to fully utilize the benefits from this precious status. This is anticipated to result in an increase in exports by more than $1.0 billion and consequently generate new employment opportunities.
The imports target for the current financial year was set at $43.3 billion for FY14. Pakistan imports were up by only 1.2 percent in the first ten months of the current fiscal year, rising from $36,664.94 million during FY13(Jul-Apr) to $37,104.50 million during first ten months of current financial year, showing an increase of $439.56million in absolute terms.
Trade Normalisation with India A meeting was held between the Commerce Ministers of the two countries in New Delhi in January 2014, on the sidelines of the 5th SAARC Business Leaders Conclave. A broad understanding was reached at this meeting, as reflected in the Joint Statement issued thereafter. The salient features of this understanding were as follows: Normalization of trade relations & providing Non-Discriminatory Market Access (NDMA) on a reciprocal basis, before the end of February 2014, increase in working hours at Wagah with the objective of round the clock operations as soon as possible; allowing transportation of cargo in containers by road through Wagah/Attari.
The Commerce Ministry has been in consultation with domestic stakeholders through various mechanisms and fora. This has also resulted in an extensive public debate in the media. During consultations, most of the stakeholders supported granting NDMA and allowing the import of all goods through the Wagah- Attari land route. Only some segments of four sectors, namely agriculture, automobiles, pharmaceuticals, and yarn manufacturers, expressed some concerns about the potential negative impact on their sectors/industries.
The concerns of these sectors have been examined and discussed with the relevant stakeholders. Most of the concerns have been addressed by including these industries' products in the sensitive list, which will provide protection through the prevailing rate of customs duty. A mechanism of further protection, if needed, is also being chalked out in close consultation with stakeholders.
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