IMPROVING THE TRADE BALANCE
The improvement in the trade balance was made possible as imports
From SHAMIM AHMED RIZVI
April 22 - 28, 2002
The provisional foreign trade figures for the first 9 months July 2001 to March 2002) of the current financial have revealed that, though both the export and imports during this period were lower as against the same period last year, the trade balance has improved by about 38 per cent.
Pakistan faces a trade gap of $818,484 million during the first nine months of the current fiscal as compared to $1.319,527 billion of the corresponding period last year.
According to sources in the Ministry of Commerce the exports fetched $6.536,426 billion against $6.720,906 billion last year, showing a decline of 2.75 per cent, or $184 million. Till February, the exports were three per cent less against the same period last year. Exports in the remaining months are expected to improve due to the reconstruction activities in Afghanistan and utilization of European Union's quota.
Imports declined by 8.53 percent to $7.354,900 billion as compared to $8.040,433 billion last year. According to the figures, the imports till February declined by 10.09 per cent, which shows that the situation has improved.
The newly released statistics proved that the imports during the nine months have reduced by $685 million, against $726 million, indicating an improvement in this sector.
Sources also said the exports attracted $724 million in March as compared to $654.8 million in February, showing an increase of 10.57 per cent, whereas the imports increased by 20.13 per cent to $886,6 million in March against $738 million in February. In March the exports declined by 1.15 per cent as compared to the same period of last year, however, the imports improved by 4.46 per cent to $886.6 million from $848.7 million in March last.
The sources further said that the Commerce Ministry was expecting $8.5 billion in terms of export earnings if the country goes ahead with this pace, however, the full participation of Pakistan's industrial and productive sector in the reconstruction of Afghanistan and utilization of the EU quota could improve the situation.
The Commerce Minister however estimates that exports earnings will be nearly $9 billion by end of June. Talking to newsmen informally at a function in Islamabad last week he claimed that export value of added textiles was gradually increasing and he expected a jump in exports earnings during April-June period. "As a matter of fact, the country's value added textile exports has already increased from 35 per cent of exports to 50 per cent. He said that while the exports of yarn, gray cloth and knitted items declined considerably, the export of garment, bed linen, towel, are up. "This is good sign and we have moved towards value-added exports in the textile sector. We are expected to move further in this direction", the minister observed. With the help of government measures, Pakistan has become more competitive in various products today compared to October 1999, he added.
The Minister disclosed that he had written a letter to the US authorities, intimating that Pakistan was not satisfied with the market access provided to its exporters and that it should be expanded to a reasonable level. "We are waiting for their reply, but we should also understand the harsh ground realities," he said adding that the European Union has provided a duty-free market access to Pakistan and to almost every item, but the exporters are not able to capitalize this opportunity. The improvement in the trade balance was made possible as imports declined more than exports during the period under review. While exports were down by 2.67 per cent, the reduction in imports was around 8.44 per cent as compared to the same period of the last financial year. However, the long-lasting improvement in the country's trade balance should come through sustained increase in exports.
This year's original export target of $10 billion is unlikely to be achieved. By the end of June, exports may be around $8.5 billion but they should be growing more rapidly from next year. The share of value-added textile exports is on the rise. There is also strong possibility of new markets opening for the country's exports.
With the revival of the economy, the demand for imports is bound to rise and it should be ready to finance their rising volume. Foreign trade figures reveal the imports in March this year were up by almost 18 per cent over February signifying that economic activity had started picking up again. This is also reflected in export figures which went up by over 11 per cent in the month of March as compared to February 2002. The rebound in the export sector should by fully exploited enabling the economy to gain full advantage from it.
Ideally, the trade balance should be zero with exports financing the total imports in any single year. This goal has been proposed and pursued a number of times in the recent past but has somehow remained elusive. During the period under review, exports financed as much as around 89 per cent of imports. The immediate task is to increase the exports up to a level where they can finance the entire annual import requirement. This task might look difficult but it is certainly not beyond reach. With economy back on the path of recovery, the objective of wiping out the trade deficit should be more vigorously pursued.