PAKISTAN'S EXTERNAL TRADE
The recent increase in trade deficit should pose no big problem
From SHAHMIM AHMED RIZVI,
Feb 16 - 22, 2004
The Commerce Minister, Humayun Akhtar Khan told newsmen in Islamabad recently that he expected to surpass the current year export target of $ 12.1 billion by the close of the financial year by June 30, 2004. "Our efforts to promote exports are bearing fruit as manifested by the expert performance during the first seven months (July 2003 to January 2004) which showed an increase of 13.2 per cent over the corresponding period last year," Mr. Khan claimed.
Exports in the first 7 months stood at $ 6.9 billion which comes to over 58 per cent of the current year target. Now with only one billion dollars exports a month the target of 12.1 billion can be met. Certainly the exports will be significantly more than $ 1 billion a month strengthening our hopes to exceed the target, the commerce minister was optimistic.
Imports during this period, however rose more sharply then export $ 9.74 billion showing an increase of 16.2 per cent over corresponding period last year. According to an analyst, rise in imports indicated that the industrial activity is on track and latest figures posted on the website of the State Bank showed that growth rate has surpassed previous financial year level.
According to the breakdown of exports figure textiles showed a recorded growth of 4.64 per cent in five months of the current fiscal year, up from 3.51 per cent of the same period a year go. Similarly leather products, pharmaceuticals, metal industries and fertilizer sectors grew from negative trend to 42.60 per cent, 14.68 per cent, 21.42 per cent and 7.77 per cent respectively. The growth in these sectors will also help government to boost its revenue collection level in the running fiscal year.
The country is seeking to export more to revive an economy hurt by war in Afghanistan and three years of drought. The central bank has cut interest rates charged for export finance six times since November 2002 to 1.5 per cent from 13 per cent. The government estimates that exports may increase 9.7 per cent to $ 12.1 billion.
Imports during these 7 months stood at $ 7.95 billion showing an increase of about 16.2 per cent over the corresponding last year against an increase of 13.2 per cent in case of exports leading to a rise in trade deficit. At the end of January 2004, Pakistan trade deficit was $ 9.74 billion as compared $ 6.96 billion in the corresponding period last year. The reason for this is that imports have risen more sharply than exports during this period. However, it is heartening to note that major increase in import has taken place on account of greater demand of meeting and raw material.
While exports have been showing steady increase in recent years and foreign exchange reserves have reached an unprecedented level of over $ 12 billion, the recent increase in trade deficit should pose no big problem. But it is for quite some times that efforts have been made to reduce the trade gap to zero to further strengthen our balance of payment position. With this strategy the targets of exports and imports were fixed. Now when the imports have risen more sharply then expected, the growing trade deficit needs to be contained in order to sustain and consolidate the strength and resilience that the external sector of economy has required. As such export promotion efforts need to be further accelerated.
It was apparent from what the commerce minister said at the press that the authorities are fully cognizant of the situation. The commerce minister said that the government was taking all possible measures for promotion of exports through diversification of exportable goods, search for new market, providing fresh incentives to the exporters and protecting our exports and exporters' interests at all international forums. He declared that Pakistan would use all available forums to protects its exporters, including moving of the tribunal of European Union, against its decision of imposing duty on Pakistan's bedlinen. The government was fully alive to the situation arising out of European Union's decision of imposing duty on its bedlinen export and it has launched an aggressive diplomatic campaign to protect the exporters' interest in the European markets. He termed bedlinen exports as an important area which contributes significantly to help Pakistan achieve its annual exports target.
Humayun said the European Union had also imposed duty on Pakistan's bedlinen export in 1996 for a period of five years but reversed its decision in 1997 as the decision was unjustified and uncalled for. Now, once again, it was likely to make the same error by imposing 13.1 per cent duty on Pakistan's bedlinen. The minister said he was convinced that Pakistan deserves concession in duty on its bedlinen exports to European Union. On the issue of abatement for basmati rice, the minister said that Pakistan would keep on enjoying the concession for at least one season as the Government of Pakistan and European Union have reached an understanding on the issue. He said that political change in Sri Lanka was the cause of delay in putting in place the Free Trade Agreement (FTA) between Islamabad and Colombo. Pakistan wants concessions from Sri Lanka for agricultural produces such as rice, potato and onion, whereas in return Sri Lanka desires concession for tea.