Faheem Saigol urge urgent review of trade policy to rescue exports
ISLAMABAD, SEPT 7 /DNA/ – The Pakistan Industrial and Traders Associations Front (PIAF) has expressed serious concern over the rapid deterioration in the country’s external trade balance, warning that a 29 per cent widening of the trade deficit to $6 billion in just two months of the current fiscal year is an alarm bell for the entire economy.
PIAF Chairman Faheemur Rehman Saigol, in a joint statement along with Senior Vice Chairman Nasrullah Mughal and Vice Chairman Tahir Manzoor Chaudhary, said that stagnant exports and a double-digit jump in imports reflect the early signs of a flawed trade liberalisation policy that is exposing Pakistan to renewed external vulnerabilities at a time when foreign reserves remain fragile and the rupee is under pressure.
The PIAF leaders said that according to official data the gap between imports and exports reached $6 billion during the July-August period of this fiscal year, which is $1.4 billion higher than the same period of the last fiscal year. This $1.4 billion additional outflow in only two months is larger than the $1 billion IMF loan tranche Pakistan hopes to negotiate later this month, underlining the scale of the challenge. Imports during the first two months soared to $11.1 billion, up 14.2 per cent or $1.4 billion more than last year, while exports remained virtually stagnant at $5.1 billion with an increase of less than one per cent.
They warned that unless urgent measures are taken, the situation could spin out of control. Pakistan’s external sector stability already hinges largely on remittances, as exports are not picking up despite successive government schemes. Yet the Ministry of Commerce and the World Bank projections of a 14 per cent boost to exports from trade liberalisation are not materialising, even though imports are rising. PIAF said that under the IMF programme the government has committed to cut import taxes by 52 per cent over five years, with the first phase implemented in July. Without export growth this policy will only worsen the trade gap, they stressed.
Faheemur Rehman Saigol pointed out that exporters are also complaining that exchange rate rigidity is eroding their competitiveness. The rupee has been appreciating after the authorities again intervened to arrest the downward slide of the local currency, closing at Rs281.72 on Tuesday. Yet even when the rupee was allowed to fall steeply two years ago, exporters could not take advantage of the situation and exports stayed stuck at around $2.5 billion a month. This shows that structural bottlenecks in the export sector remain unaddressed.
On a year-on-year basis, exports in August amounted to only $2.4 billion, down $345 million or 12.5 per cent from the same month last year. By contrast imports grew 6.4 per cent to $5.3 billion in August, the second consecutive month when imports breached the $5 billion threshold. As a result the monthly trade deficit widened over 30 per cent to $2.9 billion, an increase of $664 million in absolute terms. Even though the deficit shrank slightly month-on-month in August, the PIAF leadership said the underlying trend is worrying because the surge in imports is also reflected in higher customs duty collection. The FBR surpassed its two-month customs duty target, collecting Rs204 billion against a Rs192 billion target with 20 per cent growth, but this is coming from rising imports rather than healthier exports.
Senior Vice Chairman Nasrullah Mughal said that the government should immediately review its trade liberalisation policy, which has so far not been matched by efforts to enhance competitiveness and remove the cost and regulatory barriers faced by exporters.
Vice Chairman Tahir Manzoor Chaudhary added that the situation also calls for urgent facilitation of industries, particularly the small and medium enterprises which form the backbone of the export sector. He said concessional financing, energy tariff relief and targeted support for job creation and local supply chain rehabilitation in the flood-hit areas could help revive industrial output and support export growth.
