Exports: volumes await price push

The current account is one story that keeps getting better. The trade deficit has narrowed down to multi-month low, but is primarily driven by import compression. One way to look at the export numbers is reading the year-on-year growth at an unimpressive 2.8 percent. There is little doubt that the exports in value terms have not grown as fast as the authorities would have wanted, especially with the massive currency depreciation.

But a good look at export numbers would tell that the glass is half full. Questions were being raised on Pakistan’s capacity to export and if the country even had the exportable surplus. It is a long road to travel, but Pakistan’s export oriented sectors have surely demonstrated that the capacity is very much there. The volumes had started picking up, as the government last year, announced support measures for export industries, especially in lieu of energy prices and financing access.

The most heartening bit is the continued rise in volumes of textile sector’s most vital categories: bedwear, knitwear and readymade garments. The three combined constitute 38 percent of the country’s total exports, and have all witnessed double digit volumetric growth. What is of greater significance is the fact that the 2MFY20 growth has come on the back of a very strong FY19. Readymade garments and bedwear volumes in FY19, were already at all-time high, and that for knitwear at an 8-year high.

Even on sequential basis, the trend in volume growth is encouraging across the textile group. The pricing end of the equation has not really been that favourable, restricting the impact of the very impressive volumetric growth in key exporting items. Pricing is not a Pakistan specific phenomenon, and most countries have witnessed sharp decline in unit prices for their respective exports.

The export prices tend to have a strong correlation with international oil prices. Should that happen, Pakistan stands a good chance of pouncing on the opportunity, as many of the exporters’ woes have been or are being addressed – ranging from energy, to refunds.

Other than textiles, food export quantities have also witnessed an encouraging trend, with Basmati coming back to the fore. Among most categories, unit prices have moved in opposite direction to the volume. That said, the quantum of volumetric increase still outdoes the drop in unit price. The base seems firm, and a reversal in pricing fortunes, could well put Pakistan back on track, in terms of dollar increase in exports.