ISLAMABAD: Adviser to the Prime Minister on Commerce Abdul Razak Dawood said on Monday he’s pushing the government to bet big on the export industry by maintaining tens of millions of dollars of policy support even as the government looks to tighten its fiscal belt in a mid-year budget this month.
The all-important textile industry is at the centre of this export-led growth strategy, said Mr Dawood, as the government targets ambitious growth of 4.8 per cent in 2021-22.
Authorities have supported the export industry since coming to power in 2018 by securing competitive energy prices and offering cheap credit. Mr Dawood told Reuters in an interview he had spoken to the prime minister and finance minister about the need for continued support.
The government is looking to end tax exemptions in a number of areas in its mid-year budget as part of fiscal tightening efforts aimed at securing the release of $1 billion in International Monetary Fund (IMF) funds. The country entered a $6bn support programme with the IMF in 2019.
“People in this country don’t understand what the importance of exports (and) export-led growth strategy (is),” he said.
He said continuing support for exports is the best way to tackle Pakistan’s longstanding economic woes and achieve sustained growth.
Exports hit a historic high of $25.3bn in 2020-21, with textiles making up a whopping 60pc of those exports. That helped the country achieve 3.94pc GDP growth last year after a Covid-19–induced slump.
Exports have risen 24.7pc year-on-year in the first half of 2021-22, official data showed last week.
“You can see that there’s been a remarkable jump,” Mr Dawood said.
One driver has been the government’s policy of securing regionally competitive power rates to allow Pakistani exporters to match prices offered by peers such as India, Bangladesh and Vietnam, he said.
The central bank has also offered cheap credit to the industry after the Covid-19–induced economic slowdown.
To sustain this, Mr Dawood is encouraging the government to push through with a textile export policy, which has faced push-back from various government departments.
The policy could include billions of rupees in regionally competitive energy rate assurances, concessional funds, drawbacks and tax rebates, experts and media reports say.
While the adviser said months of negotiation between the commerce and other ministries have delayed the policy’s release, it could be enacted as early as this month with certain “conditionalities”.
Growing exports have been accompanied by a surging import bill which, Mr Dawood said, has been driven by rising global fuel and food prices and purchases of Covid-19 vaccines.
Imports grew 65pc year-on-year to reach over $40bn in the first half of this fiscal year, putting a strain on the country’s $24bn foreign exchange reserves.
The spike has not unnerved Mr Dawood, who said it also reflected “good imports” of capital goods and raw materials — a sign that the country’s industries are growing.
Some economic experts have criticised Pakistan’s over-reliance and continuous support for the textile industry.
Mr Dawood said he did not agree that the textile sector was “too pampered” but acknowledged the need to diversify Pakistan’s exports: “In the long run, we should not just depend on textiles if something were to happen to textiles, where would the country go?” Other experts do not agree with Mr Dawood’s policy of sustained support.
“The government needs to evaluate subsidies given to export-related sectors in light of the fiscal challenges as well as misuse of those subsidies,” said Mohammed Sohail, CEO of Topline Securities. “In the past, we have seen that such support has not yielded desired results.”
Published in Dawn, January 11th, 2022