Pakistan’s exports at $15 billion, growing at 1.86 percent year-on-year in 8MFY19 must be a worry. Only that the massive slide in imports seems to have masked the minimal growth in exports. But imports can only be curtailed to a limit, and the limit appears to be here. Exports growth, on the other hand, will depend on a multitude of factors, mostly out of Pakistan’s control, unlike imports.
Exports were never expected to rise immediately with the sharp currency correction. Prices were expected to slide with the dollar going dearer and that happened. Pakistan also made efforts on its part to provide the exporting sectors ground to play competitive through reduction in energy prices, issuing of promissory notes for clearing long pending dues of the textile sector, among other factors.
But as luck would have it, the sharp slide in rupee and the resultant drop in unit prices almost across all major export product categories, coincided with a considerable drop in demand in the major exporting markets of Pakistan, such as Europe and the USA.
Growth of textile and apparels in the European market has gone down from 4.1 percent in 1HFY18 to 1.4 percent in 1HFY19, according to SBP’s latest report on the state of the economy. That in the US almost doubled during the period, but Pakistan’s textile and related exports to the US grew by only 0.5 percent, down from 4.6 percent in 1HFY18.
Apart from fruits with a total share of 2.25 percent in exports, all major export categories have either faced a drop in unit prices or quantity or both. Readymade garments, for instance, grew by a massive 27 percent year-on-year in terms of quantity, but the unit price slid to $4.43 a piece, by 19 percent, restricting the growth to under 3 percent year-on-year. Towels on the other hand, fetched 11 percent higher prices year-on-year, but the quantity dropped by the same magnitude, limiting the value growth.
Basmati exports have shown resurgence with nearly 28 percent year-on-year growth in quantity. The unit prices dropped by 10 percent year-on-year, but the quantum growth were more than enough to keep the value growth well within double digits. But the story on no-Basmati rice is not as good, as the 10 percent drop in quantity, more than wiped off the Basmati gains.
Most of the exporters’ concerns seem to have been addressed. Some are also reportedly in different phases of expansion. But, the SBP has rightly pointed out that the “support would not amount to much-desired forex earnings if the exporters continue to chase the same markets without making concerted efforts to improve their product quality and brand image”.
There is a dire need for the exporters to tap new markets. Pakistan’s share in the Middle East textile and apparel market of over $5 billion is a mere 3 percent. This is simply not enough. Diversification has to happen, both in terms of product mix and markets, and soon.
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