KARACHI, July 30: Exporters did not hold back export bills in the last fiscal year as the rupee gained 3.6 per cent against the US dollar. Instead they discounted the bills or realized the export proceeds in advance to get the exchange rate benefits.

Bankers say that the stock of outstanding export bills turned negative in the fiscal 2003-04, meaning that exporters did not hold back export bills and instead discounted some of them. In 11 months to May 2003, the stock of outstanding export bills stood at minus $140 million. That is between July 2002-May 2003, the exporters had discounted $140 million export bills or realized their proceeds in advance to get exchange rate benefit. In a year-ago period they had held back $156 million export bills instead.

Senior bankers say the trend still continues as the exporters do hope further strengthening of the local currency on the back of increased exports and rising home remittances. Pakistan’s exports shot up to $11.03 billion in the fiscal 2002-03 surpassing the target of $10.4 billion. The trade policy for the current fiscal has set the export target at $12.1 billion and exporters are optimistic about meeting it for a host of reasons, including a stable currency and low interest rate environment.

The country also received record $4.2 billion home remittances in the last fiscal and this year too the remittances are likely to keep up a high pace. High hopes about meeting a higher export target and getting larger remittances lend credence to general belief that the local currency would remain stable or become mightier.

What else makes it all the more likely is that the balance of payment continue to show current account surplus not only due to higher exports and remittances, but also due to higher foreign investment.

Pakistan earned a record $4.8 billion current account surplus in 11 months to May 2003, up 76 per cent from $2.7 billion surplus recorded in a year-ago period. The economic managers seem confident that this improvement in the balance of payment will continue. That is why they have allowed the State Bank to pre-pay some of the foreign debt. Finance Minister Shaukat Aziz disclosed recently that the country has already retired before time $1 billion foreign debt this month.

Exporters admit that the current low interest rate environment is quite conducive to increasing exports as it has cut down their cost of production. But how efficiently they would compete with their rivals in the international markets after easing of trade restrictions and lifting of textile quotas from January 2005 is a big question. The textile sector which has a 67-per cent share in total exports has seemingly fastened belts to remain competitive in the world markets by making $4 billion investment mostly in BMR and capacity enhancement and technology upgrading. But the need to have a more diversified export base can hardly be over- emphasized.

The Export Promotion Bureau officials say what else need to be taken into consideration is that the country needs to increase its net exports to major trading partners. “It is the net export that is going to have a good impact on balance of payments,” says an EPB official. “If you continue to increase exports but at the same time spend more foreign exchange on imports the impact on BOP would be negative.”