Unable to meet targets: Claims remain tall, exports fall short

Pakistan’s shipments abroad plunge 5% in 11MFY15; trade deficit widens 11.7%

ISLAMABAD:

Contrary to claims and ambitions that the government was looking to increase the country’s exports, the value of Pakistan’s shipments abroad plunged 5%, clocking in at $21.9 billion during 11 months of the outgoing fiscal year.

Based on the 11-month performance, the country’s exports are likely to just touch the $24-billion mark by the end of June – when the fiscal year ends – that would mark the worst show in two years.

While exports plunged 5.3% during July-May, imports – despite the fall in global crude prices – grew on an average of 2.1%. This widened the trade deficit by 11.7%, reported the Pakistan Bureau of Statistics (PBS).



In terms of value, Pakistan’s exports contracted to $21.9 billion. Export receipts were $1.22 billion lower compared to the comparative period of the previous fiscal year. Imports, on the other hand, grew to $41.6 billion — higher by $855 million over the comparative period.

In terms of value, trade deficit widened to $19.8 billion in the first 11 months of the current fiscal year, which was $2.1 billion more than the comparative period.

Pakistan’s exports are falling at a time when regional peers are increasing their share in global trade. Pakistan’s exports amount to only 0.15% of the money generated through exports globally.

Decrease in international prices of commodities, increase in the cost of production, energy crisis and lack of research and development have impeded growth in exports, admitted the Ministry of Finance in its latest publication — the Economic Survey of Pakistan 2014-15.

When it comes to increased cost of production – which has increased despite over a 50% plunge in global crude prices – the factors at play have been varied.

Slapping taxes, worth Rs360 billion and majority of which have been indirect in nature, during the ongoing fiscal year has increased the cost of production for the industrial sector. The government intends to continue with the action plan, proposing to slap Rs238 billion in new taxes — again, mostly indirect in nature.

Targets

For the outgoing fiscal year, the government had targeted to increase exports to $27 billion – a number it is going to miss by a margin of roughly $3 billion. Revised estimates suggested that the exports will be $24.2 billion by end of June.

Pakistan has been availing duty-free access to European markets and vying to win similar benefits from the United States. Although the country’s exports to EU increased by 21% on back of the GSP Plus facility, its overall exports were hit due to loss of competiveness and possessing an extremely narrow export-base.

Growth in exports to the EU was at the expense of reduction in exports to other world markets, according to the Economic Survey.

The higher-than-projected trade gap may compound government’s woes, already struggling to achieve the upward revised target of building foreign currency reserves.

The IMF has asked the government to increase State Bank of Pakistan’s gross official reserves to $15.43 billion by the end of the current fiscal year.

Yearly statistics

Yearly trade figures also portray a similar trend. In May alone, the trade deficit widened 21.6% to $1.9 billion, according to the PBS.

As against $2.1 billion exports of May last year, receipts from exports stood at $1.95 billion last month, showing a contraction of 7.6%. However, imports increased to $3.9 billion – higher by 4.8% over imports in the same month of last year.

Monthly statistics

On a monthly basis, the trade deficit in May also widened by 5.5% over April due to 2.1% contraction in exports and 1.5% increase in imports, data from PBS showed.

Published in The Express Tribune, June 11^th,  2015.

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