EDITORIAL: Pakistan’s exports rose in dollar terms in September 2020 compared to the month before – from 1.58 billion dollars to 1.87 billion dollars; and compared favourably to September 2019 exports of 1.76 billion dollars. Imports rose to 4.26 billion dollars in September 2020 against 3.24 billion dollars in August 2020 and 3.76 billion dollars in September 2019. This data released by the Pakistan Bureau of Statistics (PBS) does not indicate which particular item(s) witnessed a rise/fall in exports and imports; hence any analysis would be based on assumptions. State Bank of Pakistan’s (SBP’s) website has not been updated and includes data for July-August only.
One possible analysis of this data is that the government’s pro-growth strategy particularly with reference to amnesty to the construction sector till the end of the current calendar year as well as special borrowing rates to small and medium entrepreneurs has succeeded in jump-starting economic activity that was stalled due to the onslaught of Covid-19 reflected by a rise in imports of raw materials/semi-finished products which, in turn, will fuel domestic economic activity, thereby increasing the number of job opportunities, and eventually exports. This stance is identical to the defence presented by the PML-N government for the massive rise in imports that accounted for a current account deficit of close to 20 billion dollars by the end of its tenure: capital goods/machinery imports from China under the China Pakistan Economic Corridor (CPEC) projects widened the current account deficit but in time domestic productivity would rise dramatically.
Another possible analysis is that imports in the month just past (post Covid-19) are higher than in September last year (pre-Covid-19), which may indicate that the stalled productive processes in several private sector units are gearing up to reach their capacity to meet demand that was constrained due to the pandemic. Once demand for the lock-down months is met for example in the automobile sector domestic sales may decline which would reduce imports.
Yet another analysis would focus on the dollar rate which was 166.2 rupee for every dollar in September 2020 against 167.7 rupee per dollar in August 2020 and was 156.17 to a dollar in September last year. Thus in rupee terms imports were 588 billion rupees in September 2019 and rose to 708.7 billion rupees in September 2020 – a rise of 20.5 percent (against 13.23 percent rise in dollar terms) while in August 2020 the total value of imports was 557.4 billion rupees – a rise of 27 percent (against 28 percent in dollar terms).
And of course trade deficit in dollar terms would be more relevant to the country’s economic managers. In September 2020, the trade deficit rose by 19 percent compared to September 2019 and by a whopping 37.4 percent when compared to August 2020. This data should be a source of serious concern to the country’s economic managers because a widening of the deficit would put further pressure on the government to procure foreign loans which would fuel the budget deficit and prices would rise further placing a further burden on households with limited income.
Therefore, care must be taken not to allow the current account deficit, with trade deficit a major component, to balloon again for then the sacrifice made by the people of this country in containing the current account deficit would have been in vain.
Copyright Business Recorder, 2020