DECLINE IN EXPORTS AND IMPORTS
TARIQ AHMED SAEEDI (firstname.lastname@example.org)
July 20 - 26, 2009
According to Federal Bureau of Statistics, total exports from the country have declined by 6.67 percent to $17.78 billion during the last fiscal 2008-09 from $19.05 billion in the fiscal 2007-08. The total imports have plunged by yet 12.87 percent. The country's imports amounted at $34.82 billion in 2008-09 as opposed to $39.96 billion in the preceding year. The trade deficit was recorded at $17.04 billion during July-June. For 2007-08, it was $20.91 billion. Although, trade deficit was slashed it increased in rupees term and so did both exports and imports.
It is pertinent to recall that government demonstrated shyness in setting export target in the trade policy for the last financial year. At that, economic uncertainty warranted unreliability of claim made regarding exports. The government has failed in achieving the target of over $19billion of FY09. There were several visible factors making the downsides in exports.
Global economic downturn was the underlying factor and internal pressures on exporting industries aggravated the impact of downturn further. Both European Union and USA - main destinations of exports from Pakistan - witnessed server economic and financial setbacks, making their consumers susceptible to low buying tendency. Litany of layoffs in giant enterprises not only caused suppression of saving potential but also wielded contraction in disposable income. Net affect of which was tapering buying power of consumers in recession-hit economies. Nevertheless, few industrialists have been rejecting the quick impact of global economic deceleration on the buying power, arguing it would take time that slowdown translated in to micro economy and corrosion of buying power. The argument suggested that target markets of the Pakistani products mainly concentrated in developed nations were defiant of economic hullaballoo.
Actually, it is perhaps slight difficult to pinpoint whether external pressures subdued Pakistani exports or instabilities at many fronts inside the country brought regression in exports. As both internal political and economic disturbances and borderless economic turmoil coincided at the same time, one could not single out latter for decline. Nor manufacturing deceleration due to power crisis, high cost of inputs could be inculpated squarely. It is safe to assume that decline was an outcome of synergetic affect of external as well internal forces.
Last year, Pakistan was confronted with many challenges of putting a halt on tumbling economy and bringing the economy back to stabilization over short run. To bring the economy back to stabilization mode, the government adopted summarily few measures unfavourable to exports. The government had pushed discount rate one after another in periodical monetary policy announcements by 550 basis points in one year. This tightening shifted the direction of market liquidity to the government securities, squeezing liquidity that should have been exposed to the private sector, an engine of exports growth.
The double-digit inflation at that time was presented an excuse of tight monetary policy. The economy has lately come back to stability, as inflation reached to 13.1 percent by June end. However, the damage to the private sector is irreparable. Pak rupee deprecation against greenback sharply during the last financial year has developed a positive addition on exporters' income statements. Until the mid of FY08, a dollar was of 67 rupees. Now its value revolved up and down Rs80. The benefits were of immense significance to the exporters. For example, sale of a product worth one dollar made about 67 rupees in June 2008, yet it did Rs80 by May 2009.
To say that textile sector has been a major contributor to the decline in exports is non-exaggerated. Textile sector constituted over 65 percent of total exports. Last year, its exports were slashed by about one billion dollar. Provisional data by the State Bank of Pakistan recorded textile exports of $9.7 billion in FY09 as opposed to $10.35 billion in FY08. The textile exports fell short of target set by the government in the beginning of the last fiscal year. Government set over $12 billion textile exports target for FY09, envisaging a 15 percent growth over textile exports in FY08. By exporting petroleum products, Pakistan fetched $983 million during last fiscal year while total exports of crude, naphtha, etc. were of $1.33 billion in the preceding year.
On the eve of financial year 2008-09, government expressed firm commitment to promote external trade in non-traditional markets and facilitate expansion of small basket of exporting products. While the latter claim was devoid of how-to-do guidelines, yet opening up of non-traditional markets for Pakistani exports was limited painfully to mantra of decorative statements throughout the year. State-funded trade promotion expositions and participation in international conferences seemed nothing more than profligacy of resources without desirable outcome. To give an excuse damn global recessions hobbled access to new markets e.g. Central Asian states is unfounded. The impact of global economic slowdown is undeniable, though Pakistan's economy is too tiny to feel the impact. But, good-for-nothing experimentations are a homegrown snag. Experimentation was done to shift attention from textile to other sectors by withdrawing research and development supports given to the textile sector last financial year. In one year, falling textile exports had government retracted its decision by restoring subsidies to the textile sector, though with pseudonym of export development funds.
Diversification is vital for the economic growth, yet it is imprudent if it is done at the expense of a key foreign exchange spinner. That Pakistan is an agriculture country must be accepted a gospel. Industries taking inputs from the sector ought to be promoted. Many well-off economies are surviving on natural resources, some on single resource such as oil. Rise in agriculture exports in the midst of other regressive sectors is a startling distinction of FY09. Exports of only rice, a major dollars earner, increased to $1.76 billion as compared to $1.58 billion. Similarly, manufacturing goods exports also depicted a rising trend. Imports of mainly industrial inputs used in e.g. agriculture and textile sector slid down in last financial year. Petroleum and food imports also moved downward.
SALES AT INTERNATIONAL EXHIBITION TO BE CONSIDERED FOR EXPORT FINANCE SCHEME
The State Bank of Pakistan has decided to take the export performance of eligible goods sold in the international fair/exhibitions into account for performance /entitlement purpose under Part-II of the Export Finance Scheme.
However, the exporters would be eligible for the scheme provided they have not already availed loan(s) under Part-I on post shipment basis as well as fulfilled the requirements as prescribed by EPD in category 'B' of Para 31 of Chapter XVII of FE Manual.
The decision has taken on the back of representations from some trade bodies/exporters to account for the export performance of goods sold in the international fair/exhibitions under Part-II of the Export Finance Scheme.