$ 1.3 BILLION TRADE DEFICIT
A thoughtful planning and conducive environment is required
From Shamim Ahmed Rizvi, Islamabad
Apr 17 - 23, 2000
The trade deficit during the first nine months of the current fiscal year (July-March 2000) has crossed $ 1.3 billion against the target of $ 800 million for the full year. According to the latest estimates the trade deficit during the current year may settle around $ 1.5 to 1.6 billion. This is despite the fact that exports have shown a growth of about 10 per cent during this period as compared to the last year.
However the encouraging performance of exports was overshadowed by a sudden rise in the oil import bill. At the time of announcement of the federal budget in last June, economic managers of the country estimated that the trade deficit in 1999-2000 would be around $ 800 million. The oil product prices last year was in the range of 10 to 12 per barrel and the government made projections and that it can reach around 18 per barrel by end of 2000. But the cut in oil production internationally jacked up the prices and it reached the lifetime high of $ 30 per barrel. The increment was over 300 per cent.
The low oil prices helped the government during the last fiscal and the trade deficit was around $ 1.570 billion. Similarly, it earned nearly Rs. 72 billion as development surcharge, one of the main sources to improve the revenue collection.
But during the current fiscal, oil imports have reached $ 1.669 billion and analysts believe that by the end of this fiscal, the bill would be over $ 2.5 billion. This showed that the import of oil would soared by $ 1 billion as compared to $ 1.458 billion in 1998-99. The rise in the petroleum prices made a great setback and the revenue collection from this source in the running fiscal would expected to be below Rs. 40 billion level.
The good cotton production in 1999-2000 improved the textile exports from the country and from July-February the textile products shipped worth $ 3.550 billion, showing an increas of 11.60 per cent as compared to the corresponding period last year. The rise in the cotton production to 9.7 million sales and rise in textile exports encouraged the textile entrepreneurs and they decided to make fresh investment in the sector.
It will however, be seen that whatever increase has been noted in exports is mainly became of a bumper cotton crop. The efforts to boost export of non traditional items and diversification of exports for which various incentives have been provided by the present government have made little success.
Commenting on the situation, the Minister for State and Chairman Export Promotion Bureau said that both the government weaknesses and irresponsible behaviour of the exporters was responsible for unsatisfactory performance of exports. The Minister for Commerce, Razzak Dawood hinted at policy changes to improve the performance in the export sector. Talking to newsmen in Islamabad he said the government has also decided to close down commercial offices in few countries which have shown disappointing performance. He said new export markets were being explored and special attention was being given to Iran, Iraq, Syria, Jordan, Libya and a few countries in Latian America which was a potential market. The Finance Minister Shaukat Aziz recently announced that the federal government will announce an export-oriented policy, backed by protection, covering areas in agriculture, small and medium sized industries, oil and gas and information technology, and establishing a micro-credit bank.
Most of our export promotion efforts have failed for the simple reason of being guided by the lure of profit alone and hurriedly launched in a style of placing the cart before the horse and wanting to make its wheels move too. The renewed emphasis on export promotion, as witnessed lately, should serve as an indication on of its growing awareness among the people who matter both in the government and the business community.
For exports' sustained growth the economy has to produce export-worthy goods to compete in the international market. Not much has been seen by way of reform in this aspect of economic recovery. Non-traditional items can increase exports but the issue of export diversification has remained a subject of endless discussions at various fora without much results on the ground. No concerted effort has been made to explore and penetrate new markets. This area must get the support of a proper institutional infrastructure.
Import substitution of POL and its products, edible oil and wheat must also be implemented as promised in the economic revival programme. Precious foreign exchange can be saved through this strategy, though it must be borne in mind that the country's import bill will grow if and when the economy's growth picks up pace. Savings by slashing edible oil and wheat imports may provide some relief, but the real difference in the trade balance will be made when exports grow by at least ten per cent every years if not more. The potential is there. Needed is thoughtful planning and conducive environment.