What will take for Pakistani exports to pick up steam? Certainly not currency devaluation. Prima facie, that’s the verdict of 11MFY19 numbers released by PBS. Barring petroleum, export value across major commodity groups is down compared to same period last year. Eighteen months since Pak rupee began its freefall against dollar, is it time to name and shame the laggards?
Turns out, textile group – responsible for nearly three-fourths of total export value – barely managed to keep its head at surface, but not above. Hopes of textile resurgence persist, nevertheless. As value-added segments of garments, knitwear, and bedwear products reflected a growth-spurt (For more detail on textile performance, read: “Exports constant, but quality improves” published on June 26, 2019).
Folks at Q-block and commerce ministry had predicted that exports would take off beginning April-19. But much like the movie godfather, “just when we thought exports would grow, what has pulled them back down again! (sic)” Short answer? Food group. But more correctly, agri-exports, which declined by a cumulative 5.4 percent.
First, a note of clarification. Net of raw cotton, textile group export has recorded an improvement over the eleven-month period, albeit of marginal 0.22 percent. The re-classification is necessary as export of all other agri-based commodities is grouped under food group.
Historically, agri-based exports have contributed twenty percent of annual commodity exports on average, within which contribution of rice stands at forty percent on average. The white kernel did not disappoint this year either, managing to expand its share in the food pie to 45 percent, even as year-on-year dollar value only improved by two percent.
Within paddy, the saving grace turned out to be IRRI (others) category, with a 70 percent share in total rice exports. IRRI also managed to fetch a higher per unit price by two percent over last year. In sharp contrast, the premium basmati rice, which until last year fetched 2.53 times average IRRI per ton price, recorded 7 percent fall in unit price. Thus, growth in basmati came at the expense of reduced margins, as basmati to IRRI premium dropped to 2.33x. On annualized basis, rice export may yet prove to be the highest in at least past 5 years.
Given the above-par performance by the dominant food group commodity (on overall basis), what proved to be the dampener? Both on per unit basis and value terms, wheat recorded the highest percentage decline compared to previous year of nearly hundred percent. However, this mostly came on the back of weak international price. Nevertheless, since its contribution to food group value in recent memory barely crosses five percent, the hit was not nearly large enough to fully explain the overall contraction.
That explanation comes from sugar. Recall that last year total agri-based exports peaked at $4.8 billion, level last seen in FY13. That peak came on the back of half a million-dollar worth of sugar exports, a result of a Rs2 billion subsidy against export quota of 1.5 million tons.
Ever since, not only has the new government failed to extend similar level of support to the sector, per ton export price has also declined from period average $350 per ton to $317 (at a time when international prices have climbed down from $360 to $327 per ton).
Much has been written in this space regarding the competitiveness of the sugar sector viz export market. However, what is interesting to note is that net of sugar and wheat export – both of which are government subsidized commodity operations – agri-based exports recorded a growth of almost three percent. Surely not a poor performance in a year when overall crop sector noted a negative growth of -4.43 percent, according to latest economic survey. It is worth questioning whether exports that cost billions to exchequer are worth the foreign exchange. Meanwhile, if the headline numbers appear to be declining without costing the taxpayer additional billions in subsidy, maybe its time let them fall.
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