KARACHI: When the nation has to take strong measures to boost economic growth and ameliorate the pain of businesspeople and ordinary people, businessmen are saying that exports are declining and national financial planning is directionless.
Suleman Chawla, the acting president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), noted that the team of economic managers lacks direction and has no collaborative mechanism between the business sector and the government. Before the International Monetary Fund (IMF) deal is revived, there will be an unprecedentedly long wait, he continued.
Chawla reiterated the FPCCI’s position by pointing out that, in contrast to most of the world’s major economies, which account for more than 70% of regional trade, Pakistan’s commerce with regional nations has never taken off and now appears to be going the other way.
According to Riazuddin, president of the SITE Association of Industries (SAI), “despite a grave necessity, the government has not been able to condense imports efficiently and is playing hide and seek with the IMF.”
“Considering that 75% of our imports are inelastic and cannot be replaced, last year’s import figures provide a picture of how constrained our capacity to cut imports is without harming the economy,” he added.
Data show that the value of imports of mineral fuels, including oil, was $17.1 billion, or 28.4% of all imports. In addition, imports of electrical gear and equipment were $4.3 billion, or 7.2%, while imports of machinery, including computers, were valued at $6.3 billion, or 10.4%.
Additional imports included cars ($2.6 billion), plastics and plastic products ($2.5 billion), animal and vegetable fats, oils, and waxes ($2.1 billion), as well as iron and steel ($3.7 billion, or 6.1%),, organic chemicals ($2.8 billion, 4.6%), and iron and steel ($3.7 billion, or 6.1%).
He said, “Our exports are likewise inelastic. Even a devaluation of Rs 100 over a brief period had little impact on export growth.
The SAI president bemoaned that “we do not have a quality exportable surplus” and stressed that it is nearly impossible to increase exports without value addition, high capital costs, prohibitive operating costs, and low productivity and efficiency. This has been made worse by restrictions on imported raw materials, such as cotton, which is now in short supply following the floods of 2022.
According to Chawla, the country’s sources of foreign exchange—exports and remittances—are declining. She also said that during the first eight months of the current fiscal year, exports to nine regional trading partners fell by 18.3%.
“Total textile exports have decreased by 11%, with a month-over-month reduction of 30% in February 2023.”
Chawla emphasised that the FPCCI is extremely concerned about the ongoing export decline, rapidly spiralling into a complete nosedive. Exports fell by 3.25 per cent in October 2023, 17.6 per cent in November, 16.3 per cent in December, and 15.4 per cent in January 2023, according to the FPCCI. He argued that this systemic deterioration needs to be stopped through a thorough yet efficient consultation approach.
The interim head of the FPCCI highlighted that with inflows of just $1.89 billion in January 2023, remittances hit a 32-month low. He continued by saying that if the government had effectively handled just one component of the foreign inflows, namely worker remittances, the nation’s foreign exchange reserves would now be close to $15 billion.
They would have been the deciding element in securing the successful conclusion of the IMF’s ninth review if they had not decreased by 20% annually. After considering the reserves held by commercial banks, Chawla claimed that Pakistan’s total reserves were just over $10 billion, while the SBP only had $4.6 billion. The reserves of SBP are important, he continued.
CEO of Arif Habib Commodities Ahsan Mehanti stated that the recent floods impacted crop yields and value-added output for exports, adding that the Western economic downturn and rising energy costs had made exports unprofitable.
Because of the rupee’s decline, imports are declining, but declining exports because of rising input prices aren’t producing a net trade surplus, he added.
“The government should make it easier to open LCs that permit the import of inputs for value-added exports and limit the inflationary trend to increase exports,” the government is advised.
The FPCCI president questioned the factors impeding the IMF staff-level agreement and requested that the government restore openness and clarity to managing the foreign account. According to him, if the IMF deal is ultimately reached, the government should also specify the next steps for stabilizing the economy.
