Record-breaking rain may dent exports

Pakistan, which has recently managed to turn the current account deficit into surplus because of fewer imports due to Covid-19 - is again expected to face a bumpy road in trade with other countries due to heavy rains, say authorities.

“It appears that because of heavy rains, particularly in Karachi, our export consignments are being delayed, hence, exports may be affected in August. Any difficulties faced by the exporters may please be brought to the notice of MOC (Ministry of Commerce),” tweeted Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood on Wednesday.

Heavy rains might have impacted operations at the Karachi Port, causing a delay in shipments, said Arif Habib Limited (AHL) Head of Research Tahir Abbas. “Unavailability of labour and workers due to heavy showers can be a reason for the operational delay,” he added.

Endorsing such views, Association of Pakistan Motorcycle Assemblers Chairman Muhammad Sabir Shaikh stated, “Bike sales were normal before the downpour, but now they are down, which indicates a slow production activity with fewer sales, hence, the entire chain will be affected and eventually exports may be delayed.”

In July 2020, the current account posted a surplus of $424 million, 1.9% of gross domestic product (GDP), against a deficit of $613 million, or 2.8% of GDP, in the same month last year, according to the Finance Division Economic Adviser’s Wing Monthly Economic Update and Outlook August 2020.

Exports declined by 14.6% to $1.9 billion ($2.2 billion last year) in July 2020. However, on a month-on-month basis, exports increased by 19.7% over June 2020 when shipments stood at $1.6 billion.

The easing of lockdown in the US and Europe - top export destinations for Pakistan’s textile goods - has helped revive exports.

Besides, the State Bank of Pakistan (SBP) has announced additional support worth Rs190 billion for exporters and investors in export-oriented sectors to offset the impact of decrease in global export opportunities due to the pandemic, according to the report.

Imports dropped by 13.3% to $3.6 billion in July 2020 ($4.2 billion last year). Consequently, the trade deficit narrowed by 11.8% to $1.7 billion ($2 billion last year).

Export of services fell by 5.2% to $436 million ($460 million last year) while import of services decreased by 9.3% to $789 million ($880 million last year).

“The main issue is not rain but debilitated infrastructure,” remarked Karachi Chamber of Commerce and Industry (KCCI) President Agha Shahab Ahmed Khan. “Rain lashes all around the world, we demand that the government immediately focus on infrastructure development and repair work.”

“The improvement in trade was not a real achievement rather it was an accidental one; the government celebrated the surplus and now rain is a good excuse for it to save itself from embarrassment, which it will face once the trade figures are out,” commented a trade expert on condition of anonymity.

“If the sewerage system is functional, roads will be in good shape, then rain will not be a big problem,” the KCCI president said, adding, “We believe the worn-out infrastructure is a major problem faced by Karachi, which has been aggravated by the record-breaking downpour and multiple spells of thunderstorms in August.”

He said, “Rain during monsoon season is not a new phenomenon and well predicted but a lack of planning and proactive measures are to be blamed for the disaster, hence, we demand that both provincial and federal governments focus on Karachi.

“Since our governments cannot deliver and manage the situation, we reiterate our demand to outsource this responsibility to the National Disaster Management Authority (NDMA) and Frontier Works Organisation (FWO) under Army supervision.”

Published in The Express Tribune, August 27^th, 2020.

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