ISLAMABAD: The government on Thursday claimed that exports have bounced back owing to proactive measures taken by the state authorities and Pakistan is among those countries whose exports recovered more rapidly.
The government has used foreign trade figures of first three quarters (July- March) 2020-21 in which trade deficit was comparatively less. However, the trade figures of 11 months July-May 2020-21 have posted a trade deficit of over 30 percent to reach over $50 billion as compared to $40.849 billion in the corresponding period of 2019-20.
Though, Commerce Ministry argues that exports will touch $25 billion mark, indications do not support the claim as growth in exports in June are not as per expectations.
According to the Economic Survey 2020-21, initiatives taken to uplift the export-oriented industries amidst the Covid-19 outbreak include: (i) gas and power subsidies through the industrial support package; (ii) extensions in the validity of subsidized power and gas utilities under erstwhile zero-rating certificates; (iii) a cumulative Rs190 billion enhancement in the limits of refinancing for banks under the Export Finance Scheme (EFS) and the Long Term Financing Facility (LTFF); (iv) loans deferment and restructuring; (v) payroll support under the Rozgar Scheme; (vi) Temporary Economic Refinance Facility (TERF); and (vii) tax refunds to improve liquidity conditions of exporters.
In order to meet the objectives of the National Tariff Policy, 2019-2024 and to remove distortions in the tariff structure, tariffs were rationalized as per details given below during the budget exercise 2020-21: (i) Additional Customs Duty (ACD) of two percent on 1,623 tariff lines, consisting of basic raw materials, was removed; (ii) Customs Duty on 90 tariff lines, consisting of intermediate goods/inputs not manufactured locally, was reduced from 11 to three percent and zero percent; (iii) in order to implement Government’s “Make in Pakistan Initiative”, tariffs were rationalized on 112 tariff lines; and (iv) Regulatory Duty (RD) on 36 tariff lines of iron & steel sector was reduced to ensure cheap raw materials for manufacturing sector.
After budget 2019-20, following measurers were taken: (i) ACD and RD on 164 tariff lines of textile sector such as fibres, yarn and fabrics of nylon, viscose, acrylic, silk, wool and vegetable-based fibres like hemp, not manufactured in the country, were removed in order to increase the share of Man Made Fibre (MMF) in textile exports; (ii) in order to meet the demand of value-added textile sector, five percent RD on import of cotton yarn was removed and the tariff was reduced from 10 percent to five percent; and (ii) ACD on 152 tariff lines pertaining to raw materials, mostly chemicals, used by the local manufacturing sector was remove.
In line with world trade, Pakistan’s exports bounced back, after a sharp hit during strict lockdown last fiscal year, mainly due to export-oriented government policies and strong economic recoveries in the main export markets. Exports were targeted at $22.7 billion for the fiscal year 2021. Exports during July-March FY2021 amounted to $18.7 billion as compared to $17.4 billion in the same period last year, which shows an impressive growth of 7.1 percent as compared to the 2.2 percent in the same period last year.
Export growth is hindered owing to lack of diversification in export goods. The trend of Pakistan’s exports of major items has remained more or less the same with concentration on three items viz cotton manufactures, leather and rice. These three categories accounted for 70.5 percent of total exports during July-March FY2021. Within these three items, cotton manufactures remain the major contributor with 58.8 percent in total exports. Thus, Pakistan’s exports are still concentrated in a few items.
Textile group, which has around 60 percent share in total exports, witnessed a growth of 9.1 percent during July-March FY2021 compared to the corresponding period last year. Rebound in exports of textile is the outcome of a series of incentives to support exporters to meet the challenges in the wake of Covid-19 and disruption in supplies. Moreover, the government’s decision to keep businesses open during lockdown provided an opportunity to secure orders diverted from economies under strict lockdown.
Total imports during July-March FY2021 clocked at $39.5 billion as compared to $34.8 billion in the same period last year, showing a growth of 13.6 percent. Non-energy imports remained the main contributor in the rising import bill. The surge in imports may be attributed to the rising demand for intermediate goods due to the resumption of economic activities; supply shock in agricultural products especially wheat, sugar and cotton; government’s accommodative measures to underpin the production of industrial sector in the form of removal of customs duty on import of raw materials; and concessionary loans.
Copyright Business Recorder, 2021