ISLAMABAD: The overall export earnings showed a modest month-on-month recovery in August as the commerce ministry is set to announce a plan for reopening the operations of more than 1,600 textile industries that were shut down in the past 16 months, a high-ranking government official told Dawn.

A strategic framework is being finalised to provide regional competitive energy pricing, working capital support, speedy refund payments, enhanced market access, and diversification of products. “The policy announcement is scheduled for this month to unlock the full production capacity potential within the country”, Caretaker Commerce Minister Gohar Ejaz told Dawn on Saturday.

The shutdown of industries extends throughout the entire value chain, encompassing stages such as ginning, weaving, spinning, processing and garment manufacturing. Additionally, there are instances where industries are operating with reduced production levels, he said.

Mr Ejaz further said that approximately 20pc of the overall installed capacity in the textile and clothing sector was impacted over the past 16 months.

Regionally competitive power tariff, speedy refunds on the cards

In August, there was a month-on-month increase of 14.27pc in overall exports compared to July, signalling a revival in the country’s export sector, as asserted by Mr Ejaz, who attributed this growth to the positive impact of caretaker government policies.

He said the Federal Board of Revenue will directly transfer Rs31 billion to exporters’ accounts on Monday. This will be followed by another refund payment to exporters very soon, the minister said, adding this will partially alleviate the working capital challenges of the exporters.

He said that textile and clothing exports jumped to $19.5bn in FY22, which marked the final year of the PTI government. He attributed this achievement to the PTI government’s implementation of regionally competitive energy tariffs (RCET).

Based on this impressive performance, it was projected that textile and clothing exports will touch $23bn in FY23. However, the exports fell to $16bn at the end of the PDM government’s term.

The minister said that the PDM government’s decision to discontinue the RCET had adverse consequences, including a decline in exports and the closure of industrial units. “We will revive the RCET across the country as part of efforts to support the industrial sector”, Mr Ejaz said.

The effective production capacity of the textile and clothing sector in Pakistan has currently surpassed $25bn, primarily due to investments exceeding $5bn in the past few years. He stated that the policy initiatives would facilitate the realisation of the industries’ complete potential.

At present, there are 6,300 textile and clothing manufacturers registered companies with the Securities and Exchange Commission of Pakistan. Additionally, more than 1,800 are registered under the category of associations of persons. Within this overall figure, the number of textile and clothing exporters registered with the Ministry of Commerce is recorded at 2,000.

The commerce ministry under the plan estimates that the country’s overall exports will reach $80bn in the next five years. The focus of the policy is also on non-traditional sectors — like pharmaceuticals, minerals, gems, and marble.

He said the focus of the new policy will also be on diversification of markets especially Central Asian States and Africa.

Better cotton output

Mr Ejaz reported that the estimated cotton production for this year stands at 12 million bales, with the possibility of an increase if no unforeseen events occur. He added that the Punjab government implemented measures that have aided in boosting production.

According to the PBS data, the exports in August reached $2.363bn against $2.483bn over the corresponding month of last year, showing a decline of 4.83pc. In the first two months, the exports fell by 6.38pc to $4.431bn this year against $6.054bn over the corresponding months of last year.

The export proceeds are declining because of internal and external factors. The commerce ministry believes that the proposed plan will help to revive the closed industries.

In FY23, the merchandise exports dipped by 12.71pc to $27.54bn from $31.78bn in FY22, missing the $32bn target by a wide margin of $4.46bn. The government has projected an export target of $30bn for the current fiscal year.

At the same time, imports also plunged by 25.85pc to $4.489bn in August from $6.054bn in the corresponding month last year. On a month-on-month basis, the imports increased by 21.16pc.

In July-August, the imports declined 25.75pc to $8.194bn this year from $11.035bn over the corresponding months of last year.

The imports fell 31pc to $55.29bn in FY23 from $80.13bn in FY22. The government has projected an import target of $58.69bn for FY24 against $55.29bn in FY23, an increase of $3.4bn or 8.14pc.

The trade deficit decelerated 40.29pc to $3.763bn in July-August from $6.302bn over the corresponding months of last year. The trade deficit decelerated by 43pc to $27.54bn in the previous fiscal year from $48.35bn in the preceding fiscal year.

Published in Dawn, September 3rd, 2023