THE calls to promulgate a trade emergency in the country are not without a rationale. There are fears that Pakistan may have to go to the International Monetary Fund (IMF) in the short to medium term to cope with the balance-of-payments quagmire.

However, important questions that need to be answered are: why have innumerable bailouts from the IMF not helped Pakistan sort out its problems? Why, unlike India and Bangladesh, have Pakistan’s economic managers failed to bolster trade over the same period? And what should be done to rejuvenate exports and cut imports?

The trade-to-GDP ratio of Pakistan stood at 25 per cent in 2016, far behind India (40pc) and Bangladesh (38pc). The ratio has in fact declined persistently from the highs of 36pc in 2006-08 to the lows of 33pc in 2013 and 25pc in 2016.

The government should focus more on structural reforms instead of expecting the unexpected from the CPEC

The ratio in India too has declined for the same period, but has to a greater extent managed to gain much more than it lost over the same previous years. Bangladesh also experienced ups and downs, but managed to regain the ratio of 38pc at the end of 2016.

Pakistan has taken loans from the IMF over the years to pay its previous loans, that is to honour debt liabilities, in lieu of spending it on structural reforms. With the expensively borrowed money, the country has invariably built foreign reserves, stabilised the rupee against the dollar and plugged twin deficits.

Spending the borrowed money purposelessly has caused the economy to bear irreparable economic losses. For instance, the fiscal deficit has risen owing to higher spending on debt servicing, leaving less for government to spend on public infrastructure or to incentivise exporters. A lack of funds to honour export refunds puts a crunch on exporters, affecting the trade equation.

Simultaneously, the economy needs to focus more on innovation, information technology and contemporary world’s demands because consumers prioritise quality over quantity. This can be achieved by bridging the gap between academia and industries.

For trade ratio to increase, the economic managers should pursue industries and exporters to get involved in highly diversified trade activities. Our exports at around $21 billion compared to $48bn imports reflect a myopic approach to deal with the country’s trade.

Attributing the burgeoning imports only to the China-Pakistan Economic Corridor (CPEC) won’t pull the economy out of the crisis. The fact is that economic managers are responsible for failing to contrive contingency plans. Were they unaware of the size of the multibillion-dollar project?

Let’s accept, for a while, their claim that imports will ease once CPEC projects reach maturity. But why have exports deteriorated over the same period?

Therefore, it is understandable to work more on structural reforms than to expect the unexpected from the CPEC. The megaproject is not a panacea to our trade woes, nor will it resolve all the problems our economy faces today. It will be better to add the CPEC to the trade equation rather than painting it as a sole dose to relieve the ailing economy.

A bolstered trade ratio helps economy accomplish inclusive growth, enabling small and medium businesses to exploit the market for their products on competitive prices. So when the foundations of the economy are cemented, it is not difficult for the government to tackle rising unemployment or achieve higher economic growth.

The 5.3pc economic growth Pakistan achieved last fiscal year is more exclusive and least inclusive. Despite higher economic growth, macroeconomic fundamentals — balance of payments, exports, public debt — have worsened over the period.

In contrast, India and Bangladesh have achieved higher trade-to-GDP ratios and 7pc economic growth during the same period by involving small and medium businesses.

Concurrently, perpetually and persistently unexplored markets should be included in the trade equation to help trade grow with countries. Pakistan’s dependence on six countries — Germany, the United Arab Emirates, the United States, Britain, Saudi Arabia and Afghanistan — has kept exports more volatile and less sustained.

Exploring new markets for locally produced products, encouraging huge diversifications, signing preferential trade agreements by safeguarding the interests of local businesses, involving small and medium businesses and reducing exports barriers can help tackle trade-related miseries. These are what the economy needs right now to achieve desired inclusive economic growth and an improved trade equation.

The writers teach at the COMSATS Institute of Information Technology, Abbottabad

Published in Dawn, The Business and Finance Weekly, December 11th, 2017