‘Increase in dollar value of exports has little to do with policies’

ISLAMABAD: The Economic Advisory Group (EAG) of the Policy Research Institute of Market Prime Institute (PRIME) has noted that the increase in dollar value of exports has little to do with these policies contrary to the perception of policy makers.

The EAG noted that the policy landscape in Pakistan has historically been dominated by sectoral policies, which continue to prevent economic resources from moving towards more productive activities.

Importantly, these policies take the form of protection from international competition and poorly targeted subsidies to, for example, the “export” sectors.

The failure of these policies can be judged from looking at Pakistan’s export basket, which continues to comprise low value-added and less sophisticated products.

However, more recently, the sharp increase in the dollar value of exports has created an erroneous perception that these policies are finally delivering.

For example, the policymakers have interpreted the year-on-year increase of 28 percent in the dollar value of textile exports during the first four months of Fiscal Year 2022 as evidence that existing subsidies such as the preferential energy tariff have been successful in meeting their intended objective.

On a careful look, and contrary to the perception of policymakers, the EAG finds that the increase in dollar value of exports has little to do with these policies.

The analysis shows that, out of the $1.7 billion increase in textile exports during Jul-Nov 2021, more than two-third is simply due to an increase in international prices.

In other words, had international prices remained the same as last year, the dollar value of textile exports would have increased by only 7.8 percent.

Copyright Business Recorder, 2022