Prime Minister Nawaz Sharif, flanked by Finance Minister Ishaq Dar and Commerce Minister Khurram Dastgir, presided over the ceremony where a Rs 180 billion export package was announced. His audience, specially invited for the event, consisted of members of the business community, widely believed to be loyal PML-N supporters, and the Prime Minister's remarks on the occasion relating to his 2018 re-election bid prompted analysts to link the package with general elections next year. This is unfortunate as a package to fuel exports, which is the need of the hour, should not be presented as a partisan gesture.

Critics of the government point to the fact that the package was inordinately delayed and had been in the works for more than a couple of months, a contention reflected by frequent statements from federal Commerce Minister and Board of Investment Chairman Miftah Ismail who took credit for proposals contained in the package. This criticism is more than justified given the recent data that reveals that Pakistan's total exports have declined by more than 12 percent between 2013 and 2015 - a period when the international price of oil, a major input for the manufacturing sector, reached new lows.

Be that as it may, given the Rs 180 billion revenue implications of the package it could not have been announced without the approval of Finance Minister Ishaq Dar. Total exports as per the Pakistan Bureau of Statistics latest figures, were around US $18 billion between January and October 2016 and the Rs 180 billion package (around 1.74 billion dollars at today's dollar rupee parity) indicates taxes levied on exporters which would henceforth contribute to a reduction in their costs of production which was well above that of their regional competitors. The Finance Minister urged the exporters to ensure exports reach the target of 10 percent of GDP subsequent to this package and exporters by and large thanked the government for it and committed that exports would now certainly rise.

The package would undoubtedly help the exporters as regards their liquidity in business but the question, however, is whether these incentives would be sufficient to ensure exports rise to 10 percent of GDP. There are some external factors, including a decline in commodity prices - our major export items - that would continue to dampen our exports. However, one critical factor that would be necessary for the government to ensure is prompt payment of refunds due to exporters. Delays in repayment of refunds has been a bone of contention between the federal government and exporters for decades due to their seemingly divergent objectives: the government's objective is to show higher revenue than is in fact the case thereby a lower fiscal deficit while the exporters face serious liquidity issues prompting many to rely on borrowing which, in turn, raises their cost of production. Thus it is critical for the government to ensure prompt repayment of refunds.

Another factor in declining exports is an overvalued rupee - an overvaluation that is part of a deliberate policy that enables the government to understate its external debt. The State Bank of Pakistan uploaded the real effective exchange rate (REER) for each month and the month's average exchange rate. In February 2013, the last full month of the PPP-led coalition government, REER was 111.03 while the exchange rate average for the month was 97.9 or a difference of 13.13 while in April 2016 (the last month for which this data has been uploaded on the SBP website) REER was as high as 120.078 while the average for the month was 104.67 or a difference of 15.4. This widening difference reflects the government's questionable intervention in the forex market which in turn has a major negative implication on our exports.

And finally, the government needs to revisit its current policy of heavy reliance on borrowing from the external and domestic commercial sectors - loans that are procured at high interest rates with a very short amortization period. Disturbingly, data reveals that the net inflows from external borrowings turned negative a month ago due to this very reliance. This, no doubt, will put further pressure on the rupee which, if the difference between REER and the exchange rate widens, would have negative implications on exports that may override the positive effects of the recent package. One would therefore urge the government not to engage in interventions that would compromise its own objective vis-a-vis exporters that has come at a cost to the treasury. It would take at least 18 months for exporters to recapture their market share if at all. Will the SMEs benefit is the moot question? They need liquidity and cheap, reliable energy to do the job.