It is feared to suffer $ 2 billion losses —
one-fifth of the targeted exports
By SYED M.
Nov 19 - 25, 2001
For an economy highly dependent on, and constantly
pressurized to expand the base of its exports, a strengthening Rupee
poses many problems for Pakistan. It means lessened earnings in term
of rupee at a time when external trade in disarray and increased
insurance costs have pushed the prices of Pakistani exports in the
After September 11 and with the beginning of US
bombings on Afghanistan dollar kept shedding its value against the
rupee: dollar which traded for over Rs 67 in the open market slid down
to Rs 60.45 on November 14. The inter-bank market was no different:
dollar slid from Rs 64 to Rs 61 and for the first time for as long as
one remembers dollar traded lower in the open market than in the
Pakistani exporters have to make adjustments for
increased insurance and freight costs — imposition of war risk
insurance and five-fold increase in hull insurance on all ships
entering the national coastal waters from $ 25,000 per visit to $
125,000 per visit. This has increased the export prices to
incompetitive levels in many cases in the international market which
is reportedly reluctant to place fresh orders, and in many cases also
not honouring previous commitments.
Sources in the export-oriented industries told PAGE
that with all the other overheads remaining constant the slow down of
economic activities across the globe, particularly in such major
markets as the US and EU pose immense challenges to the exports.
Despite a strong performance on November 14 when dollar gained Rs
2.15, the first time since the US bombings on Afghanistan, many feel
that the parity would take weeks, and may even be months, to
As is, exports have already showing signs of
slowing down. Warnings, disguised as statements, have already emanated
from the highest levels of the government. According to the chairman
of Export Promotion Bureau, Tariq Ikram, the country is feared to
suffer $ 2 billion losses — one-fifth of the targeted exports in the
Retail sales in the US, Pakistan's biggest trading
partner, has gone down as much as by 60 per cent and retail sales in
second biggest market, the EU, has also declined by 20-25 per cent
during the same period. This, in turn, would mean reduced export from
Pakistan to the discomfort of exporters denied the volumes in not too
distant a past and declining earnings — from Rs 64 to Rs 61 for each
dollar in the interbank market and much more in the open market in
term of rupee.
The reduced earnings is not much unlike a reduction
in salary of which poses many problems to an individual, and for that
matter an export-oriented company: on the one hand, input costs
remains the same, or even on the rise, and on the other increased
insurance rates are pushing the export prices. Even with input costs
remaining the same, the buck, as they say, doesn't stop here as dollar
has shed almost six rupees since that fateful day in September.
Putting Pakistan, like many other countries
surprisingly not including India, in a war zone despite safe arrival
and departures of hundreds of ships in last two months and termination
of commercial and cargo operations by a number of foreign airlines
poses challenges for national exports. Many feel the foreign importers
are using 'timely delivery' as a pretext to pressurize the local
exporters to slash the prices. For many others, it is a genuine
concern particularly with the nearing of the Christmas season which
require advance planning from September onwards.
The negative impact is all too evident from the
trickling of seafood, leather and value-added leather made-ups exports
as well as the two-third reduction in the export-oriented small and
medium enterprises hub of Sialkot housing hundreds of units engaged in
the manufacture of surgical instruments, sports goods and cutlery.
This has brought not only export orders to a trickle but also in
drying up of fresh orders.
While textiles group, which make up 65 per cent of
the total exports from the country, has been lucky enough to ward off
the negative impact by limited removal of quota restrictions many
other sectors have not been so lucky. However, the situation resulted
in lay offs in the industry and we have to wait for at least another
month to see any positive signs of the removal of restrictions. The
Karachi Chamber of Commerce and Industry had expressed fear that the
turmoil would cost the country between $ 1.5 billion to $ 2 billion
during the current fiscal ending June 30 next year.
The slowdown of economic activities across the
globe has also taken a toll on imports due to the drying up of the
local markets as people inclined to buy only the necessities to save
money for fear of hard times. The imports have also registered a
substantial decline of 11 per cent since September 11.
A weak dollar, as evident, poses the risk to the
cash flow situation and liquidity of the export-based industries
particularly the small and medium enterprises. The strengthening of
dollar this week with the unusual gaining of Rs 2.15 in a single day
the open market in last month-and-half is welcomed by the exporters.
More of a repeated performance would help instill further confidence.