FeaturedNationalVOLUME 19 ISSUE # 11

$100 billion export target & ground realities

Pakistan has planned to raise its exports to $50 billion in five years, with the aim to achieve a $100 billion export target in the long term to address its recurrent economic crises. To this end,a robust export strategy will be developed to re-position Pakistan competitively in the global market. For this purpose, a new Industrial Advisory Council has been set comprising CEOs from leading industrial groups and the secretaries of industries, commerce and finance as members to work exclusively on increasing Pakistani exports.The idea behind the Council is to bring together the collective expertise and wisdom of the industry leaders to address critical issues and propose actionable solutions for the enhancement of the country’s industrial sector.

It may be added here that the World Bank recently advised that Pakistan should increase both private investments and exports to sustain strong economic growth. The Bank recommended gradual reduction in the effective rates of protection through a long-term tariff rationalization strategy to encourage exports and reallocate export financing away from working capital and into capacity building and expansion through the Long-Term Financing Facility.

However, in a recent report the International Monetary Fund  has expressed doubts about Pakistan’s export goals by projecting figures that significantly lag behind the target set by the caretaker government’s five-year strategic plan.As per the IMF’s first review of the $3 billion Standby Arrangement, Pakistan’s export proceeds over the next five years are likely to be much less than the commerce ministry’s ambitious objective of reaching $100bn by the end of the 2027-28 fiscal year.While the IMF bases its projections on the current growth rates, the government projects aggressive growth and a diversified export portfolio.

Ground realities are quite different from the overambitious targets set. As against the government’s expectations, the Fund estimates that Pakistan’s exports will increase gradually from $30.84bn in FY24, $32.35bn in FY25, $34.68bn in FY26, $37.25bn in FY27, and to $39.46bn in FY28. The IMF report links its projection to various factors including the exclusion of the State Bank of Pakistan from export refinancing schemes and the gas price disparities between export and non-export industries.It has been decided that the SBP will phase out refinancing schemes like export finance and long-term financing by mid-2028. The government also plans to incorporate subsidy amounts in its annual budget to assist new initiatives. But due to limited space and high loan rates, provision of subsidy may not be easy.

The export target of $100bn envisages that clothing and textile exports would reach $50bn, or about half of the total. In addition, an amount of $25bn is projected for agriculture and food exports would rise to $25bn, with another $25bn to be earned from engineering, pharmaceutical and industrial exports.The government’s strategy also encompasses the establishment of 50,000 export oriented small and medium-sized enterprises and the promotion of specialised export products, targeting markets in China, the Gulf Cooperation Council (GCC), and Africa.Apart from textile and garment sectors in Lahore, Multan, Faisalabad and Karachi, the export plan would focus on jewels and gems, minerals, fresh fruits, flowers, processed fruit and juices, meat, dairy and milk products, furniture, cutlery, engineering, surgical, leather, and sports goods.

Butthe realisation of these ambitious plans and targets faces many hurdles, especially the high cost of energy and other inputs. Key factors currently hindering exports include high import tariff rates, limited availability of long-term financing for firms to expand export capacity, inadequate provision of market intelligence services for exporters, and low quality and productivity of Pakistani firms.Political instability and policy inconsistencies have also negatively impacted the country’s export performance.

During the last 10 years Pakistan’s regional neighbours have managed to double their export market shares, while our exports have stagnated.

It is clear that without basic reforms, there is little prospect of meaningful change in the export volume over the next decade. Among other things we need taxation as well as customs tariff reforms and a liberalised trade policy based on the principle of ease of doing business. Achieving this goal also requires major reforms to guarantee exporters affordable capital by zero-rating all exports.

These are some of the measures to achieve substantial growth in exports in the short and long term, enabling us to overcome balance of payments problems and sparing us the humiliation of going to the IMF again and again for handouts and bailouts.