Editorial: The data released by Pakistan Bureau of Statistics (PBS) indicates that exports rose by 574 million dollars July-December 2020 compared to the year before – from 11,524 million dollars in 2019 to 12,098 million dollars in 2020 – a rise of 4.98 percent. This rise is partly attributable to the government’s success in containing the negative fallout of Covid-19 on productivity (the recent State Bank of Pakistan report argues that the contraction in economic activity in Q4-FY20 proved to be short lived), partly due to the inability of Indian and Bangladeshi exporters to meet their orders due to the scale of the Covid crisis in those countries – with some orders diverted to Pakistan, or partly due to an extensive mapping exercise that identified the country’s export potential at 31 billion dollars, claimed by Moeed Yousaf, Special Assistant to the Prime Minister, during a briefing.
Imports rose from 23.1 billion dollars July-December 2019 to 24.5 billion dollars in the comparable period of 2020 – a rise of 1.4 billion rupees and 5.72 percent which naturally resulted in a higher trade deficit - by 6.44 percent between the two years - from negative 11.67 billion dollars July-December 2019 to negative 12.42 billion dollars in the comparable period of 2020. The Khan administration’s stalwarts maintain that the rise in imports is mainly due to raw materials which indicate a rise in productive activity as a direct consequence of the fiscal and monetary incentives extended by the Ministry of Finance and the State Bank of Pakistan on the instructions of the Prime Minister.
PBS has released data for July and August 2020 where imports of raw materials of: (i) consumer goods rose from 232.7 billion rupees in June 2020 to 264 billion rupees in July – a rise of 31.3 billion rupees in actual terms and 13.4 in percentage terms and declined to 243.4 billion rupees in August – or a decline of 20.6 billion rupees in August and of nearly 8 percent from July; while (ii) capital goods registered a rise in imports from 60.477 billion rupees in June 2020 to 70.2 billion rupees in July – a rise of a little under 10 billion rupees and which declined to 61 billion rupees in August.
The PBS data indicates that imports of consumers goods peaked in February 2020 at 130 billion rupees, declined to 107 billion rupees in June 2020 and further to 101 billion rupees by August last year while raw material imports (consumers foods) peaked in April 2020 at 282 billion rupees declining to 226.4 billion rupees in March 2020. Capital goods’ imports peaked in June 2020 at 210 billion rupees, declining to 173.9 billion rupees in July and 149.7 billion rupees in August 2020.
The foregoing indicates that exports/imports monthly data is not always on an upward trajectory and raw materials do not constitute the bulk of the rise in imports. As per the State Bank of Pakistan which provides data for July-November on its website, total import payments through banks were 17.6 billion dollars in 2019 and 17.8 billion dollars in 2020 – a rise that can be attributed to the decline in the discount rate from 13.25 to 7 percent as well as an entire range of fiscal and monetary incentives post Covid-19 extended to the productive sectors. This is in spite of the SBP acknowledging that private sector credit registered negative 1.1 percent July-September 2020 against negative 1.8 percent in April-June 2020 and plus 2.9 percent during fiscal year 2019-20. An improvement in exports or a decline in the trade deficit with a consequent impact on the current account, therefore, should not be a source of concern or complacency partly because the global economy remains hostage to the pandemic and is critical for the government to focus on growth policies with the capacity to lubricate the wheels of the economy and thereby also help create new employment opportunities.
Copyright Business Recorder, 2021