PAKISTAN'S EXPORT PERFORMANCE
The CBR has many explanations, not meeting the targets
From Shamim Ahmed Rizvi, Islamabad
Dec 25 - 31, 2000
With every passing month the amount of trade deficit is increasing both in terms of volume and percentage confirming the apprehensions of the independent economists that the tall claims made by the Minister of Commerce are not going to materialise. The trade deficit which stood at 62 million by the end of Sep. 2000 has risen 923 million at the end of November. The Commerce Minister has assured the nation that the trade deficit during current fiscal will not exceed 1 billion.
Almost same is the position on the revenue generation side Central Board of Revenue (CBR) has been able to collect only Rs. 140 billion during the first 5 months against the 12 months target of Rs. 430 billion. On an average monthly revenue collection is about Rs. 23 billion against the target of about Rs. 36 billion. There is no sign of fulfilling the all promises of collecting Rs. 100 billion more this year as a result of tax surveys and documentation of economy. The CBR as usual, has many explanations, for not meeting the projected targets.
Pakistan's export performance in the first five months of the current financial year failed to come up to the optimistic projection set out in the Trade Policy which was framed after the announcement of the budget for this year. As a result, the country's credit worthiness with its trading partners shows greater vulnerability. The trade deficit for the five-month up to 923 million as against 726.8 million during the comparable period of the last financial year has thus widened the trade gap to 24.81 per cent of export receipts, imports outstripping exports by this ratio as compared to last year's 21.82 per cent. This indicates that the country has drifted away from the goal of self-reliance and therefore an increase in dependence on foreign loans is what the trade statistics for the period under review have brought to fore.
Total export proceeds for July-November 2000-2001 reflected 11.64 per cent growth to 3.72 billion as against which imports increased by 14.39 per cent to 4.64 billion. Thus the disappointingly lower rate of growth in exports than the targeted growth of around 20 per cent seems to be adding to the country's difficulties on the external front. The average export per month for the first five months of the year worked out to about 650 million when the target of 10 billion of exports for the whole year pre-supposed an increase in the export earnings to 8.33 million per month. Assuming that if the average of exports remains unchanged for the remaining months of the year, total export earnings would remain stagnant at around 8 billion as in the past three years. Against the backdrop of continued slowdown in the tempo of exports, it would appear that the target set for the current fiscal year, is going to prove to be a Herculean task for the government.
The exports of traditional items, specially cotton yarn and a few other textile goods, failed to pick up a significant pace which remained between 5 to 7 per cent as opposed to the strategy in the Trade Policy to double the rate of growth in the exports of traditional goods. It may be pointed out here that the target of approximately 20 per cent cumulative increase in export earnings can never be met if a low rate of growth of 5 to 10 per cent is maintained in the traditional manufactured items. The situation would have been worse if exports of raw cotton would not have risen significantly as compared to the figures for the corresponding period of last year, although raw cotton is hardly counted as an important source of export earnings in the face of substantial rise in its consumption in the local textile industry.
In this situation it seems imperative for the authorities concerned, including the Commerce Ministry and Export Promotion Bureau, to take up a review in depth of the factors which have a bearing on the tempo of export flows.
Last month the Chairman of Export Promotion Bureau (EPB), Tariq Ikram disclosed government's plans for the establishment of two new export finance institutions, one in the form of an Export-Import Bank (exim bank) and the other an Export Credit Guarantee Scheme which would be exclusively used for the financing of small and medium scale enterprises (SMEs). It is true that a specialised banking institution for offering financing facilities to exporters and export industries is a necessity which so far has remained conspicuous by its absence in Pakistan.
There can be no two opinions that the country's export potential can be harnessed to the maximum possible extent only if adequate export financing facilities are assured to the export industries, particularly the small and medium enterprises. The export refinance facilities offered at present by commercial banks are largely absorbed by relatively big export industries and commercial exporters. Among them too, only those enjoy a successful access to export refinance who are relatively reputable and have contacts with bank managers. Moreover, the export refinance limits of individual banks are also fully utilised at times and therefore the flow of this facility is interrupted so often. Seen in this context, the consolidation of export refinance resources under one roof of a specialised export import bank, would make a lot of difference towards much better and well distributed flow of financing facilities for the exporters and export industries.