While Pakistan is in the throes of myriad political problems, the equally worrying spectre is the declining trend recorded in exports that has cast a long-term negative shadow on the economic position of the country.
Pakistan is already lagging behind in establishing a financial equilibrium as the volume of is imports far exceeds the level of exports and this factor is proving harmful for the overall economic health of the country.
The balance of payment crisis is getting acute by the day as exports have not showed signs of improving and the financial planners taking half-hearted measures to control imports.
There are many reasons cited for the failure recorded in increasing exports but it appears that most reasons are not tackled with appropriate measures with the result that export sector remain mired in the bog.
It is certainly not easy to increase the size of exports with the prevailing structural defects in the economic practices of the country as an overhaul in this respect is what is required and, that too, without much further delay.
It is reported that Pakistan’s economy keeps on shrinking consistently as is borne out by the figures that point out exports declined in their decline on a year-on-year basis, dipping for the second consecutive month as they fell 18.3 per cent from $2.9 billion a year ago.
In contrast, imports rose 11.3 per cent to $5.25 billion in November compared to October, meaning a monthly trade deficit of $2.88 billion. However, the imports were 33.6 per cent lower than the November 2021 figure of $7.89 billion, meaning the annual trade gap was 42.5 per cent down in November.
The coalition government is taking the credit of lowering annual trade gap but many economic experts are of the view that the artificial means adopted by the incumbent finance minister may bring long-term harm to the national economy as imports are required direly for the manufacturing sector to keep on performing at high levels otherwise it would be difficult to meet the revenue requirements of the country.
In the first five months of the ongoing financial year meaning from July to November of the ongoing fiscal year, exports were down 3.5 per cent at $11.93 billion compared to $12.36 billion in the corresponding period last year. The drop shows the government would find it difficult to achieve the export target this fiscal year and this is certainly a bad news for the overall economic cycle and will result in further reducing the levels of income of the country. It is now quite clear that one of the major causes of falling exports was the exchange rate instability.
The non-payment of sales tax refunds was another contributory factor to the falling exports from the country. It is however conceded that globally retailers are carrying huge inventories as retail sales have suffered due to high inflation. It is also pointed out that sluggish foreign demand and domestic supply issues, following the floods-induced destruction of exportable crops, are responsible for the weak export performance.
In case of Pakistan, the discontinuation of duty drawbacks on local taxes and levies by the government has also created liquidity issues for the export sector. It must be kept in view that in the previous fiscal year (2021-22), Pakistan not only achieved its export target but also exceeded the psychological barrier of $30 billion as proceeds rose 26.6 per cent to $31.85 billion from $25.16 billion a year earlier. It must also be kept in view that the import bill also jumped 43 per cent to cross $80 billion in 2021-22, up from $56.12 billion a year ago.
In this context it is reported that Pakistan’s exports to nine regional countries posted a negative growth of 1.32 per cent in the first five months of the current fiscal year from a year ago mainly driven by a drop in export proceeds to China.
It is reported that Pakistan’s exports to Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives account for a small amount of $1.264 billion clocking just 13.22 per cent of Pakistan’s total global exports of $9.56 billion in this period.
China tops the list of Pakistan’s regional exports leaving other populous countries India and Bangladesh behind. But Pakistan’s exports to China posted negative growth in the first months of the current financial year. The bulk of the regional exports share, which accounts for 53.66 per cent is with China while the remaining is for eight countries.
In this context, Pakistan’s exports to the Middle East dipped 5.57 per cent on a year-on-year basis to $951.78 million in the first five months of FY23 from $1.008 billion mainly led by a substantial decline in exports to the United Arab Emirates.
The exports to the region saw a mixed trend with an increase to Saudi Arabia, Qatar and Bahrain, while a decline to other countries of the region, according to data compiled by the State Bank of Pakistan.
The UAE has emerged as the leading country for Pakistan’s export of goods as it saw a decline of 11.04 per cent to $614.88 million from $691.23 million over the corresponding months of last year. Nearly 65 per cent of the total exports to the region go alone to the UAE market