Rising exports

Published May 29, 2021

EXPORTS from Pakistan continue to show an upward trend as overseas shipments jumped significantly by 13.6pc to $20.9bn during the first 10 months of the present fiscal year from $18.4bn a year ago as per Pakistan Bureau of Statistics data for the July-April period. The rebound in the nation’s exports is a positive development as it suggests economic recovery in spite of the challenges from the countrywide resurgence of the coronavirus. Simultaneously, imports are also increasing — and faster than exports. The encouraging part is that the demand for imported raw materials and capital goods has seen substantial growth this year owing to improved economic conditions in the country as domestic industry upgrades technology and expands production capacity. Yet the increase in wheat, sugar and cotton imports, because of the poor performance of agriculture, should be a cause of concern for policymakers in Islamabad. Encouraged by this year’s growth trend, the commerce ministry is proposing an export target of $28bn for the next fiscal, which is more than 16pc greater than the expected export revenues of around $24bn from Pakistan this year. Thus, Pakistan could almost double its exports to around $42bn over the next five years if the present growth trend is sustained.

For Pakistan it is critical to boost its exports rapidly to ward off a balance-of-payments crisis in future. At present, the country has one of the lowest levels of exports in the world as a percentage of its GDP — around 8pc. According to the World Bank’s World Development Indicators, the same ratio averaged 24.7pc for low-middle-income nations, 17.5pc for the South Asian countries and 24.4pc for highly indebted poor states back in 2019. Even though the rapid jump in remittances sent home by Pakistanis living abroad has cushioned the current account, the abysmally low exports-to-GDP ratio should worry policymakers as poor export performance has been the chief driver of balance-of-payment crises in the past. The present growth trend in exports is encouraging. But it also underscores the need for ensuring that it continues for a longer period. That will not be possible without producing more exportable surpluses, diversification of export products and markets, and improvement, in fact sophistication, in product quality. More importantly, the government needs to support the exporters in the quest to be internationally competitive, and increase productivity through skill and technology upgradation instead of doling out subsidies in different forms at the expense of taxpayers.

Published in Dawn, May 29th, 2021

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