Pakistan’s exports are falling, and the drop is setting off alarm bells at the highest levels. In the past few days, the finance minister has held a full court meeting with a large delegation from the textile industry, led by representatives from the spinning sector. A photograph from the meeting was also released to the media which shows the government is concerned about not only consulting with industry leaders on the matter, but also to be seen as consulting. So what is the problem that has everybody so concerned? First quarter exports have dropped by about 10pc from the corresponding period last year. Exports in September, when compared with the same month last year, show an even steeper drop of 17pc. These may not sound like big numbers, but if the trend keeps up it could spell some amount of trouble for the government, especially considering that the trade deficit is continuing to widen. The government just held a round of meetings with textile industry leaders, who are giving reasons like an overvalued currency, energy availability and high interest rates. Additionally, they also mention stuck-up sales tax refunds which they argue deprive them of the liquidity they need to smoothly operate their companies. The fact that the situation is developing precisely at a time when the government is declaring victory in its efforts to turn the economy around, and basking in the approvals of international media, credit rating agencies and the IMF, simply shows the level of disconnect that has developed between economic policymakers and stakeholders, particularly those from the real sector of the economy. Exporters typically point to the rising cost of doing business as the main reason, while more recent reports by economists have pointed towards an overvalued rupee. The State Bank has pointed towards declining commodity prices, as well as growing competition from SE Asia and the IMF has flagged falling commodity prices, energy shortages and the exchange rate as the cause. The fact that such a wide spectrum of causes is being pointed to by different stakeholders — industry and creditors — shows the lack of any real understanding that exists regarding this crucial weakness in the economy. This is surprising since the matter at hand is hardly so complex as to defy understanding, and the lack of comprehension creates policy weakness. The government needs to take better stock of the downward trend in exports because it is a key employment creator as well as an earner of foreign exchange. Continuing inflows of foreign exchange, through remittances and borrowing, are apparently creating a sense of complacency at the finance ministry.
pk.shafaqna.com
