ISLAMABAD: The government said on Thursday that exports had rebounded thanks to proactive measures taken by state authorities and that Pakistan is among the countries whose exports have recovered the fastest.
The government used foreign trade figures from the first three quarters (July-March) 2020-2021 in which the trade deficit was comparatively smaller. However, trade figures for the 11 months July-May 2020-21 showed a trade deficit of over 30% to over $ 50 billion from $ 40.849 billion for the corresponding period of 2019-20.
Although the Commerce Department says exports will hit the $ 25 billion mark, indications do not support this claim as export growth in June fell short of expectations.
According to the Economic Survey 2020-21, initiatives taken to boost export-oriented industries amid the Covid-19 epidemic include: (i) gas and electricity subsidies through the program industrial support; (ii) extending the validity of subsidized electricity and gas utilities under old zero-rated certificates; (iii) a cumulative increase of Rs190 billion in bank refinancing limits under the export financing program (EFS) and the long-term financing facility (LTFF); (iv) deferral and restructuring of loans; (v) support for the wage bill under the Rozgar program; (vi) Temporary Economic Refinancing Facility (TERF); and (vii) tax refunds to improve exporters’ liquidity conditions.
In order to meet the objectives of the national tariff policy, 2019-2024 and to eliminate the distortions in the tariff structure, the tariffs have been rationalized according to the details below during the fiscal year 2020-21: (i) Duties two percent additional customs duties (ACD) on 1,623 tariff lines, made up of basic raw materials, have been abolished; (ii) customs duties on 90 tariff lines, comprising intermediate goods / inputs not manufactured locally, have been reduced from 11 to 3% and 0%; (iii) in order to implement the government’s “Make in Pakistan” initiative, tariffs were rationalized on 112 tariff lines; and (iv) the Regulatory Right (RD) on 36 tariff lines in the steel sector has been reduced to ensure cheap raw materials for the manufacturing sector.
After the 2019-20 budget, the following measures were taken: (i) ACD and RD on 164 tariff lines in the textile sector such as fibers, threads and fabrics of nylon, viscose, acrylic, silk, wool and vegetable fibers such as hemp, not produced in the country, were phased out in order to increase the share of synthetic fibers (MMF) in textile exports; (ii) in order to meet the demand of the value-added textile sector, five percent DR on cotton yarn import was abolished and the tariff was reduced from 10 percent to five percent; and (ii) the ACD on 152 tariff lines for raw materials, mainly chemicals, used by the local manufacturing sector has been removed.
In line with global trade, Pakistani exports rebounded, after a hard blow during the strict lockdown in the previous fiscal year, mainly due to government policies focused on exports and the strong economic recovery in key export markets. Exports were targeted at $ 22.7 billion for fiscal year 2021. Exports in fiscal year July-March 2021 amounted to $ 18.7 billion compared to $ 17.4 billion in the same period. last year, which shows an impressive growth of 7.1 percent compared to 2.2 percent in the same period last year.
Export growth is hampered by the lack of diversification of export goods. The Pakistani export trend of major items has remained more or less the same with a concentration on three items namely cotton items, leather and rice. These three categories accounted for 70.5 percent of total exports in fiscal year July-March 2021. Among these three items, cotton manufactures remain the main contributor with 58.8 percent of total exports. Thus, Pakistani exports are still concentrated on a few items.
The textile group, which holds around 60% of total exports, recorded a growth of 9.1% in the financial year July-March 2021 compared to the corresponding period last year. The rebound in textile exports is the result of a series of incentives to help exporters meet the challenges of Covid-19 and supply disruptions. Additionally, the government’s decision to keep businesses open during the lockdown has helped secure orders diverted from economies under tight lockdown.
Total imports in fiscal year July-March 2021 reached $ 39.5 billion from $ 34.8 billion for the same period last year, showing growth of 13.6 percent. Non-energy imports remained the main contributor to the rise in the import bill. The surge in imports can be attributed to the increased demand for intermediate goods due to the resumption of economic activities; supply shock in agricultural products, in particular wheat, sugar and cotton; accommodative measures by the government to support production in the industrial sector in the form of the elimination of tariffs on the import of raw materials; and concessional loans.
Copyright Business Recorder, 2021