In an otherwise bleak economic scenario, it is a welcome piece of news that exports from Pakistan are showing signs of recovery. As per reports, new opportunities are arising in the wake of the Covid-19 pandemic due to efforts of exporters to diversify their products.
According to the facts and figures released by the State Bank of Pakistan, before the coronavirus outbreak at the end of February in Pakistan, exports were on an upward trajectory and it was reflected in an increase of 14% in dollar terms during the month as compared to the same period last year. The momentum of February 2020 continued despite the Covid-19 outbreak as in the first 10 days of March, exports registered an increase of 13% as compared to the same period the previous year.
Export-oriented industries began suffering in mid-March due to the lockdown imposed to control the pandemic followed by the global economic slowdown. Trade figures for March 2020 showed an 8% year-on-year decline in exports. The situation persisted and in April 2020, exports slumped 54% as compared to April 2019. In the situation, the government and exporters rose to the occasion. With efforts of the government to encourage the export sector, the first signs of recovery were observed in May 2020, which saw a 33% decline in exports. The momentum continued in June 2020 as the decline in exports, which stood at 54% in April and 33% in May, was narrowed to a single digit at 6% in dollar terms.
A detailed analysis of export figures indicates that the new strategy developed for geographical and product diversification for exports bore fruit. For instance, there has been a significant improvement in exports to Africa, which is the outcome of the “Look Africa Policy” launched some time back. Another significant development is that exports to the Middle East have risen as well, showing the success of the new strategy to explore new markets and find new destinations. Sensing increased demand in the international market, the government also allowed the export of personal protective equipment (PPE), barring three items, which was reflected in the surge in June exports.
Product and market diversification is the brightest side of the new export drive. For instance, exports of meat products have registered good growth while the tobacco sector also holds great promise for the future. In the textile sector, value-added products have shown improvement. There are also favourable reports of a rise in the traditional exports of Pakistan, such as garments and bedwear, which are projected to pick up pace in the current financial year. According to industry circles, the beginning of exports of home appliances and diversification of cement exports to China and the Philippines are indicative of the new enterprise shown by our export community.
As a result of the overall progress in exports, the trade balance has shown a slight improvement. It is relevant to add here that a continuous fall in imports is also providing some breathing space to the government to manage external accounts despite negative growth in exports. In June, the import bill posted a negative growth of 16.5pc to $3.643b against $4.364b over the last year. In the outgoing fiscal year (2019-20), the import bill witnessed a steep decline of $10.29b or 18.78pc to $44.509b as compared to $54.799b last year. During the same period, exports declined by $1.57b, while the import bill was lower by $10.29b, narrowing the current account deficit.
According to Commerce Ministry data, the current account deficit shrank by $8.7b or 27.4pc in the financial year 2019-20 due to a substantial decline in imports as compared to a moderate fall in export proceeds. The country’s trade deficit also came down by 27.41pc in the FY20 from a year ago. The decline is mainly due to a double-digit fall in imports. Meanwhile, the government’s corrective measures also helped slow down imports to reduce pressures on foreign exchange reserves. In absolute terms, the trade gap narrowed to $23.099b in July-June from $31.820b over the corresponding months last year.
At a meeting held in Islamabad recently, Adviser on Commerce Razzak Dawood said that the government would continue its policy of encouraging exports by facilitating the exploration of non-traditional markets. At the same time, special attention needs to be paid to push our textile exports because in recent months the sale of cotton yarn and fabric has gone down in the world market. Talking about the export strategy, Dawood reiterated that greater emphasis would be laid on product diversification with regard to engineering products, pharmaceuticals, agriculture products and services.
Dawood voiced optimism over achieving the export target in the new fiscal year and stressed that the government would continue the policy of encouraging exports through incentives, both in bank credit and energy costs. The latter holds crucial significance because energy is the costliest in Pakistan as compared to rival exporting countries, which makes our products uncompetitive in the world market.