Economic planner aiming at a target of $11.5 for the next financial year.

Apr 21 - 27, 2003

Despite turbulence in the region in consequence of US attack on Iraq, the export target fixed for the current financial year (2002-2003) at $10.4 billion will be met, claimed the Commerce Minister, Akhtar Abdul Rehman while talking to the newsmen informally at a function in Islamabad last week. Encouraged by this performance, economic planner aiming at a target of $11.5 for the next financial year.

This is not mere rhetoric. This optimism is supported by the country's performance during the first nine months (July 2002- March 2003) of the current fiscal. According to the provisional foreign trade figures released by the Commerce Ministry, Pakistan's exports increased by 20.2 per cent to $7.859 billion, during the nine months of the current financial year as compared to $6.538 billion in the corresponding period last year. The situation also depicts an increase of four per cent over the target of $7.546 fixed for this period and so it appears likely that the year 2002-2003 target of $10.4 billion will be met fully.

However, the imports during this period also rose by about 23 per cent widening the trade gap by over 107 per cent as compared to last year. Imports during the first nine months rose to $9.3 billion as against $7.34 billion last year.

Explaining the increased trade gap, the Minister said that it was positive sign as the most of the increase in the imports related to import of machinery which will bring betterment in promoting the industrial sectors.

According to the provisional foreign trade figures, Pakistan, in the first nine months, has achieved 76 per cent of the target of $10.4 billion set for fiscal year 2002-2003.

Imports have increased by 22.8 per cent, to $9.0318 billion against $7.3548 billion of last year, indicating that the country spent nearly $1.677 billion more mainly on import on power generation and textile machinery besides oil products.

However, trade deficit widened by 36.2 per cent to $1.172 billion as compared to $616.7 million in the corresponding period of previous year. Exports in March stood at $939 million against $725.8 million of last year showing an increase of 29.4 per cent, while imports showed a growth of 43.5 per cent to $1.272 billion as compared to $886.6 million. It is indicated from the statistics that trade deficit increased by 107.2 per cent from the same month of 2001-2002.

Exports increased by 21 per cent to $939 million in March as compared to $776.4 million in February last, while imports showed a growth of 38.5 per cent to $1.272 million against $918.7 million in February. Trade deficit rose by 134 per cent as it amounted to $333.2 million in march against $142.3 million in February.

It is for the first time in decades that exports targets for 3 continuous quarters have successfully been met despite a war going on in the region. It confirms that the policies are moving in the right direction and the economy has gained strength to absorb minor shocks. Pakistan focus on finding new markets and diversification of its exports is most result-oriented. At the same time maximum facilities and concession are being offered to exporters to promote their business activity. Exporting financing is now available at all time low rate of interest of 7.5 per cent.

A high-level inter-ministerial committee constituted last month by the Prime Minister for recommending measures to boost export-led economic growth, reportedly held its first meeting recently and chalked out a number of plans. According to a press release issued after the meeting, decisions of far-reaching importance were taken, which, if implemented, would remove some of the overdue grievances of export industries and also offer much needed fiscal incentives to step up industrial investment in the country.

One of the incentives proposed by the committee is removal of the existing 5 per cent customs duty on the import of plants and machinery, thereby bringing the duty to zero rate. As a result, the competing capability of our industries could definitely improve and thus the goal of export-led economic growth would be easier to attain. It is not, however, clear as to whether all the industries would be allowed to enjoy the proposed incentive or it will be restricted to export industries alone. The committee has also endorsed the Prime Minister's idea to establish two economic zones, one at Karachi and the other at Pindi Bhattian. The details of incentives supporting investment activity in these zones are likely to be finalized shortly.

Two important issues, namely, the mounting backlog of sales tax refunds to exporters held back by the CBR and early removal of flows in the existing Duty and Tax Remission for Export rules (DTRE), were examined by the high-level committee. A directive was reportedly issued to the CBR to speedily complete the process of sales tax refund, thereby enabling the exporters to redouble their efforts.