Trade is an important tool to boost the economic progress of any country. Researchers revealed that Pakistan facing tough challenges to foreign trade across its eastern, western and north-western borders. They urged that the poor relations with neighboring country India, war and political unrest in Afghanistan, lack of development of transportation country’s infrastructure, and strife in tribal areas and Balochistan have been created various challenges to boost Pakistan’s trade.
Presently the Government of Pakistan has been focusing the China-Pakistan Economic Corridor (CPEC) projects, which has also stimulated interest in the potential for trade expansion with China. The Ministry of Finance said in a report that the State Bank of Pakistan gradually declined its mark-up rate on Export Refinancing Facility (EFR) from 9.0 percent in 2010 gradually declined to 3.0 percent in July 2016 till date. Similarly Long Term Financing Facility (LTFF) for 3-10 years duration from approximately 11.4 percent gradually declined to 6.0 percent in July 2015 till date, to permit export sector industries to make investments on competitive basis. Unluckily the Government of Pakistan faces the severe issue of a badly regulated financial system that facilitates tax evasion and assists money laundering out of the country. This lack of financial supervision by the government officials creates the dual issue of fiscal and current account deficits that are directly accountable for the balance of payment crisis.
Unfortunately, various governments have completed their tenures but the government officials made little to no headway in enhancing its ability to monitor the financial system. On the other hand country’s weak presentation in the export sector is directly answerable for its perpetual balance of payment concerns. It is also calculated that since 1980, exports from India and Bangladesh have increased at a rate that is greater than 5 times that of the growth of Pakistan’s exports.
Different sources mentioned that to make matters worse, Pakistan engaged in an import-led growth policy through borrowing from abroad to finance large-scale infrastructure projects — CPEC being the most prominent example.
Researchers also state that high net borrowing from abroad leads to real exchange rate appreciation which further restricts export growth. All of these elements have combined to generate the current balance of payment shortfall. Now the newly government has come in power and the government must address these challenges in order to address the problem of rapid depreciation of the rupee.
Pakistan traders also urge that although the government of Pakistan trades with a large number of states. About 55 percent of Pakistan’s exports go to ten states such as UK, Germany, USA, China, UAE, Afghanistan, France, Bangladesh, Span and Italy as well. Furthermore, the traders’ statistics also showed that USA has largest share in export by 16 percent followed by European countries 11 percent, in total exports.
More surprisingly our exports volume to China has dropped from 9.0 percent in FY2015 to 7.0 percent in FY 2018. The share of exports to Afghanistan also recorded a fall in present years from 8 percent in 2016-17 to 7 percent during previous year, whereas, the share of exports to UAE remained stagnant. According to the provisional statistics released through the Pakistan Bureau of Statistics (PBS), the exports during June, 2018 was $ 1,887 million as against to $ 2,144 million during May, 2018 explaining a decline of 11.99 percent and by 1.00 percent as against to $1,906 million in June, 2017. Furthermore, the exports during July–June, 2017-2018 totaled $ 23,222 million as compared to $ 20,422 million during the same period of previous year explaining a rise of 13.71 percent.
The officials of PBS also mentioned in a statement that main commodities of exports during June, 2018 were Knitwear (Rs.30,609 million), Readymade garments (Rs.28,024 million), Bedwear (Rs.24,434 million), Cotton cloth (Rs.22,386 million), Cotton yarn (Rs.14,747 million), Rice others (Rs.12,457 million), Towels (Rs.7,137 million), Madeup articles (excl. towels & bedwear) (Rs.6,289 million), Rice Basmati (Rs.5,048 million) and Sugar (Rs.4,093 million).
It is also calculated that Pakistan imports from various states like UAE, Indonesia, China, and Saud Arabia constitutes greater than 50 percent of the total imports. During previous fiscal year, share of imports from China has declined from 32 percent in last fiscal year to 25 percent during July-January 2017-18. However share of import from U.A.E, has also declined by 2 percent during July-January 2017-18 as against to the corresponding period last year. PBS also mentioned in the report that the provisional statistics of Imports into the country during June, 2018 was $5,694 million as against to $5,814 million during May, 2018 explaining a decline of 2.06 percent but grew by 26.20 percent as against to $ 4,512 million in June, 2017.
Although the imports during July-June, 2017–2018 totaled $ 60,867 million as compared to $ 52,910 million during the same period of previous year explaining a rise of 15.04 percent. Main commodities of imports during June, 2018 were Petroleum products (Rs.79,400 million), Petroleum crude (Rs.58,352 million), Natural Gas Liquefied (Rs. 39,352), Aircrafts, ships & boats (Rs.35,762 million), Plastic materials (Rs.22,742 million), Iron & steel (Rs.22,606 million), Electrical machinery & apparatus (Rs.21,996 million), Power Generating Machinery (Rs.21,806), Raw cotton (Rs.19,422 million) and Palm oil (Rs.18,002 million).