ISLAMABAD: Prime Minister Nawaz Sharif will announce on Tuesday the much-awaited export package worth Rs70 billion aimed at arresting the trend of falling exports in the remaining months of the current fiscal year.
The package is worked out in a way to minimise the impact of the 8 per cent rebate that the Indian government gives to its exporters to compensate for falling prices of commodities in the international market.
In the first half of 2016-17, export proceeds fell to $9.91bn from $10.31bn a year ago, Pakistan Bureau of Statistics (PBS) data shows. Pakistan’s exports fell to $19.5bn in 2015-16 from $25bn in 2013-14.
The proposed Prime Minister’s Trade Enhancement Initiative covers raw materials used in five value-added sectors, namely textiles, leather, sports, carpets and surgical goods.
Merchandise exports declined over 3pc in December
The government will give a rebate of 3pc to 6pc on export proceeds of the value chain. The lowest rate will be on the export of primary or low value-added products while the highest rate will apply to value-added products.
In the textile and clothing sectors, the rebate will be 3pc and 4pc on the export of yarn and fabric, respectively.
In the value-added sector, the government will give a 6pc rebate on the exports of readymade garments and 5pc on home textiles. “This package has no condition such as a percentage increase in exports over the last year,” a source told Dawn.
This will be direct cash support to exporters to help them reduce their cost of production, according to the source.
The government is already extending support to textile exporters based on their incremental increase in exports. The government gives a 4pc rebate on a 10pc incremental increase in ready-made garments exports over the preceding year, 2pc on home-textile and 1pc on fabric. There is no support on the export of raw material or yarn.
The government has already paid out Rs2.5bn to these two sectors in the last fiscal year. The aim of this policy was to support value-addition in the export sector.
Pakistan’s exports of merchandise posted negative growth of over 3pc in December on a year-on-year basis.
Exporters of raw materials and value-added products have demanded 8pc cash support on export proceeds. But the source said the finance ministry rejected this demand, saying the tax collection by the Federal Board of Revenue (FBR) missed the target by over Rs127bn in July-Dec.
According to the source, the government was left with no option but to give the relief package to exporters who are also supporters of the ruling PML-N.
“This is an election year and there is no IMF programme,” an official in the finance ministry said.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Zubair Tufail said the high cost of energy is one of the reasons for the falling export proceeds. “The energy cost, especially in Karachi, is very high compared to India,” he said.
The drop in exports and remittances has contributed to a rising current account deficit in the first five months of 2016-17. In July-Dec, the import bill rose 10.11pc year-on-year to $24.4bn. In December alone, it increased 17.58pc to $4.49bn. Machinery imports are on the rise because of an increase in infrastructure investment, especially the construction of roads.
The trade deficit in merchandise rose nearly 22pc year-on-year to $14.49bn in the first six months of the current fiscal year because of falling exports and rising imports.
The deficit stood at $2.76bn in December, an increase of 35.68pc compared to $2.03bn a year ago.
Published in Dawn, January 10th, 2017