The government must focus on increasing exports especially with declining remittances. This was stated by Dr Hafiz Pasha, former Minister for Finance, while speaking on Aaj programme Paisa Bolta Hai with Anjum Ibrahim.
Pasha said the government needs to focus on exports and as long as exports are not increased Pakistan would face problem. Pakistan has to renegotiate FTA with China because it is very unfavourable with Chinese exports to Pakistan is eight time higher as compared to Pakistan's exports to China, which is unsustainable.
Dr Pasha expressed regret at the delay in the announcement of incentive package for exporters and stated that increase in exports was essential for the repayment of loans. He pointed out that exports of goods and services witnessed a decline of eight percent during the current fiscal year which is a very unfortunate development.
Exports should have been the top priority of the government and the delay in the announcement of the incentive package in inexplicable.
Dr Pasha, however, acknowledged that the government has taken appropriate steps by allowing zero rating to our key export items thereby exempting them from import duty and has also increased refund payments but still there are many refunds still pending. If the government wants to introduce any incentive scheme, then the maximum relief should be extended to value added goods for example textiles and manufacturing sector, he advised.
The GDP growth during the current fiscal year may be between 4 to 4.5 percent due to lower than expected growth in industrial and agriculture sectors, Dr Pasha stated.
There has been no growth rate in large scale industrial sector during the last five months while efforts to increase productivity in cotton crop has not been successful so far as sowing area of cotton crop was 20 percent less than the year before.
The production of cotton crop may be 11 million bales, 3 million bales less than the requirement, Dar Pasha said. This would necessitate import of 3 million bales of cotton, he added.
Pakistan's ranking in ease of doing business has declined and the country's performance in the competitive index was also very poor. On top of that, Dr Pasha stated, Pakistan has to consider its policy of exchange rate as the alignment of the exchange rate is not appropriate with a difference of Rs 2.80 between the rate in the open market rate and in interbank rate which is unsustainable. As Pakistan currency is linked to the dollar, which is on the rise, Pakistan currency against Euro is at a disadvantage and would hurt our exports.
Pakistan's external debt has increasing phenomenally and in the last four month alone $2 billion was added to the external debt. Domestic debt is not an issue as one can print currency but the real challenge is the increase in external debt during the last three years, he stated and added that credit to the private sector is not available because the government is the major borrower from the banks.
The investment rate has not increased, he further added. Pasha said that in net terms Pakistan external debt has increased from $61 billion to $73 billion.
National Saving certificate inflows have declined to half. As per rates calculated by Dr Pasha and his team of students, unemployment rate has increased to 8 percent and the most disturbing aspect is unemployment rate of graduates is 20 percent which is a crisis, he added.
Dr Pasha pointed out that the majority of China Pakistan Economic Corridor projects are on paper and financial close of only five out of 18 power sector projects have taken place; while on the other hand PSDP's total allocation for CPEC in the first three months is Rs 64 billion only which is eight percent of the entire PSDP. He said the government on the instructions of International Monetary Fund (IMF, flooded unlimited PIBs at wrong time when interest rate was high, which cost Rs 150 billion interest payment. He said most important indicator for the Prime Minister's is of country's exchange rate, which of course increased but reserves were build through borrowing. Inflation is at lower side so government while taking selective indicators projects that its performance was better. We try to tell the government that there are still some areas for improvement, he added.