DECLINING EXPORTS SHRINKING PAKISTAN'S GLOBAL TRADE SHARE
SHABBIR H. KAZMI
Apr 13 - 19, 2009
With the completion of nine months of ongoing financial year it is becoming evident that trade deficit may shrink, not because of any handsome increase in exports but substantial decline in imports. A shortfall in sugarcane and wheat production is likely to force the country to indulge in procurement of these commodities. The delay in commencement of Fatima Fertilizer plant will necessitate import of more than 250,000 tons of urea before close of the year. Declining probability of any significant increase in textiles and clothing, despite withdrawal of anti-dumping duty on bed linen by the European Commission mars outlook. On top of this rising crude oil prices may erode the recent gains.
Pakistan's declining exports are the outcome of a number of factors. These include external and internal pressures, including political uncertainty. Cost of doing business is on the rise because of extended hours of load shedding, no reduction in utility charges, despite crude oil reducing to one third of its peak level. Expectations of any reduction in interest rate were not only assassinated at the recent auction of treasury bills but fears of further hike in discount rates have started raising heads. Most of the experts are of the view that unless Pakistan opts for massive reduction in interest rates, probability of enhancing exports remains low.
However, some of the analysts are of the view that Pakistan's economy is suffering the most due to political uncertainty. People having the capacity and enjoying the clout have neither the time nor the capacity to remove the most irritating factors. Worst of all is the refusal to reduce prices of POL products. At present the incidence of taxes on certain products is close to half of the sale price of the products. A commission has been establish to explore the reasons for higher POL prices. However, much success cannot be expected because the government is desperate in mobilizing additional revenue due to falling imports.
According to the latest data Pakistan's imports during first nine months of the current financial year declined by 6.56% as compared to the imports recorded during the corresponding period of last year. Imports during July-March (2008-09) were recorded at $26.124 billion as against the imports of $27.959 billion recorded during July-March (2007-08), according to Federal Bureau of Statistics figures.
Exports during the time under review were recorded at $13.414 billion as against the exports of $13.432 billion recorded during the same period of last fiscal year, registering only a marginal increase. Exports during March 2009 totaled $1.313 billion as against the export of $1.266 billion recorded during February 2009, showing an increase of 3.71%.
Imports during the month under review also witnessed increase of 10.91% by growing up from $2.123 billion in February 2009 to $2.355 billion in March 2009. As compared to the same month of last financial year, imports during March 2009 witnessed decrease of 38.38% where as the exports were declined by 25.88%. Imports and exports during March 2008 were recorded at $3.821 billion and $1.771 billion respectively.
Based on the figures provided by FBS, the trade deficit during the first nine months of current fiscal year was recorded at $12.709 billion, showing a decrease of 12.51% when compared to the trade deficit of $14.527 billion recorded during the corresponding period of 2007-08.
Not only meeting export target seems difficult but probability of boosting exports is also low under the prevailing circumstances. To begin with yields in agriculture are low but production is also likely to remain low due to inadequate availability of water and shortage of fertilizer. Though, the government is spending a lot of foreign exchange and also paying huge subsidy on imported fertilizer. It has been recorded that while local farmers a paying high price of urea the commodity is being smuggled to CIS countries.
The first jolt has been caused with the announcement of a shortfall in wheat output. But the real and more serious issue is that the government had fixed wheat support price at a time when global prices were double the current prices. The government also has a limited capacity to store about 6.5 million tons wheat. Therefore, it is feared that farmers will not the price which was assured. If this happens the country may face the worst shortfall of wheat next year. It was believed that government would offer incentives to the exporters to achieve the export target but expectations are dieing fast due to mounting budget deficit.
With the rise in mercury level the spell of load shedding is likely to increase and directly affect the industrial production as well as add to the costs. There seems no probability of improving power generation despite tall claims of PEPCO.