Textile dependency

Pakistan exports wheat, sugar, and cotton, but ending up importing them in recent months due to poor crop yields

April 21, 2021

The import bill for March was approaching record levels while the trade gap significantly widened – both worrying signs for the current account balance. sugar, fertilisers and pesticides, automobiles, mobile phones, and industrial machinery. The year-on-year increase is 71%, which is also significant because the full effect of the Covid-19 pandemic was just starting to hit the local and global economies last March, meaning that demand declines had not fully set in.

This would not be a problem in itself if exports had shown similar growth, but that was not the case. Exports The import bill stood at $5.66 billion in March, mainly on account of oil and gas, wheat andincreased 31% to $2.36 billion in March, which would generally be considered a strong performance if not for the fact that imports had ballooned. Analysts have noted that part of the spike in imports is attributable to agricultural commodities. Pakistan usually exports wheat, sugar, and cotton, but ending up importing them in recent months due to poor crop yields. In fact, total food group imports and fertiliser imports both doubled, while significant increases were also seen in oil and gas and automobiles — the latter almost tripled. A positive in the import stats was a 72% surge in machinery. However, power generators and cell phones, rather than industrial machinery, made up a large share of the increase.

Meanwhile, textile exports were up 30%, continuing a recent trend of positive growth. But the data also shows Pakistan’s dependency on the sector — textiles made up 60% of total exports. Persisting failure to diversify has made Pakistan export-commodity-dependent, a negative term for countries where more than 60% of total merchandise exports are composed of commodities. In our case, it is literally a single commodity.

This does not mean that we need to stop supporting a lucrative sector. It is still a money-maker with growth potential. What we need to do is diversify so that we can grow and reduce commodity dependence. In the words of former UN Conference on Trade and Development Secretary-General Mukhisa Kituyi, “Given that commodity dependence often negatively impacts a country’s economic development, it is important and urgent to reduce it to make faster progress towards meeting the sustainable development goals.”

Published in The Express Tribune, April 21st, 2021.

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