ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet is all set to consider Strategic Trade Policy Framework (STPF) 2020-25 on Wednesday (July 28) as the Commerce Ministry has addressed concerns of the SBP and the FBR, official sources told Business Recorder.
Exports projections for STPF 2020-25 are based on a sound econometric partial equilibrium model. The explanatory variables used in the model include World GDP,
Pakistan’s GDP and real effective exchange rate (i.e. nominal exchange rate, domestic prices, Pakistan’s export prices and competitor’s exports prices).
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Three scenarios have been constructed to project the future exports. The difference between the three scenarios was the domestic prices of Pakistan which reflect the competitiveness and cost of doing business in the country. It is assumed that effective government interventions in terms of STPF, National Tariff Policy, Trade Facilitation, Energy Reforms, Technology Upgradation, Easy Financing and other on-going Ease of Doing Business initiatives will have an impact on competitiveness and thereby enhance exports. The scenario 1 assumed that the government interventions under the STPF and other initiatives would be minimal and the prices and cost of doing business would follow a status quo trend. Therefore, for FY 21 prices have been taken at 10.8% growth (actual value) followed by 8% in FY 22 and then onwards it will follow CAGR (6.5%) from FY 23 to FY 25. The scenario 2(medium) assumed that government’s interventions would reduce the growth is domestic prices and therefore the price increase would be 8 per cent in FY 21, 6.5 per cent in FY 22 and followed by 6 per cent between 23-25. The scenario 3(optimistic) assumed that growth is domestic prices would be 7.2 per cent in FY 21 and then will remain at 5.5 per cent from FY 22 to FY 25.
Based on these scenarios, the following export projections were estimated i.e. for 2021-22, scenario 1, $ 23.08 billion, scenario 2, $ 27.15 billion and scenario 3, $ 29.10 billion. Fiscal year 2022-23, scenario 1, $ 25.21 billion, scenario 2, $ 30.19 billion and scenario 3, $ 32.98 billion. Fiscal Year, 2023-24, scenario 1, $ 26.70 billion, scenario 2, $ 32.55 billion, scenario 3, $ 36.26 billion and FY 2024-25, scenario 1, $ 28.57 billion, scenario 2, $ 35.46 billion and scenario 3, $ 40.27 billion.
Furthermore, to estimate the sectoral export projections of the traditional and new strategic sectors under the STPF their respective exports shares in Pakistan’s total exports were taken into account for the past 10 years and the current year FY 21 (11 months). The growth in their shares was estimated using their CAGR and based on these CAGRs the projected share and value of export for each sector was determined. A comprehensive private stakeholder engagement was also undertaken that ascertains that the sector-wise projections formulated above are well within their respective sectors’ estimated forecasts.
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Commerce Ministry says that it will endeavor to achieve the export projection as specified in scenario 3 i.e.$ 40.27 billion by year 2025. These projections include the recent more than expected growth forecast by the Government of Pakistan.
The ECC of the Cabinet in its meeting held on March 31, 2021 deferred the consideration of Summary and directed the MoC to hold further consultations with relevant stakeholders. However, the ECC of the Cabinet approved the formulation of National Export Development Board (NEDB) which has been envisaged under the draft STPF I). The NEDB will be notified in due course of time.
In compliance with the ECC decision, observations of State Bank of Pakistan (SBP) and Federal Board of Revenue (FBR) were sought as both the stakeholders indicated their concerns during the said meeting of ECC. Due consideration has been given to the observations of the SBP and the FBR and same have been addressed and accordingly incorporated in the draft STPF 2020-25.
Subsequently, Secretary Commerce vide U.O of June 15, 2021 requested Secretary Cabinet Division to include the revised draft STPF 2020-25 in the forthcoming meeting of the ECC of the Cabinet. However, the Cabinet Division, in a letter of June 18, 2021 stated that a fresh summary may be furnished to them for placing the same before the ECC of the Cabinet for consideration.
Copyright Business Recorder, 2021