Pakistan's current account deficit was up by 148 percent in fiscal year 2017 which must be a source of serious concern for the Dar-led Finance Ministry as it indicates that the two desired foreign exchange earning sources are not performing well - notably exports and remittances. Pakistan's exports have been steadily declining due to two major flawed domestic economic policy decisions. First, the inordinate delays in the release of refunds to exporters by the Federal Board of Revenue (FBR) which has compelled them to borrow 'excessively' to meet their liquidity needs; the associated borrowing cost has raised input costs making our export products uncompetitive compared to other countries. This policy is certainly not unique to the Sharif administration's tenure. The FBR, under the administrative control of the Ministry of Finance, has always been more focused on raising revenue to bring the budget deficit to sustainable levels to appease international donor agencies as well as domestic economists; or in other words, on an objective that is not within the terms of reference of the Board which should ideally be more focused on formulating reforms in its administration to minimize corruption/nepotism charges and to reform the tax structure to render it more equitable, fair and non-anomalous. Instead in its drive to generate ever-rising revenue the FBR has supported those taxes that are easy to collect, which explains the reason behind the massive rise in reliance on withholding taxes on consumer items/services sector - a form of sales tax whose incidence on the poor is greater than on the rich rather than on a tax on income.

Secondly, an overvalued rupee as a policy decision supported by Finance Minister Ishaq Dar has worked against exports for the past four years making our exports uncompetitive and imports more attractive. The Finance Minister has unfortunately refused to even acknowledge that the rupee is overvalued and its links to declining exports has been repeatedly dismissed by him.

External factors too have contributed to a decline in our exports. Consumer items constitute the bulk of our export items whose international market prices have been declining, which explains why the total value, as opposed to the volume, of our exports have declined. In this context, it is relevant to note that extending the GSP Plus status by the European Union to Pakistan is to be reviewed by January next year and there are a number of non-economic prevalent factors that may compromise its continuation. The death penalty by military courts, while justified from the point of view of a nation subjected to heavy loss of life and assets by frequent terror attacks for more than a decade, is nonetheless a requirement for the GSP Plus. While the government has formulated a strategy to convince the EU countries to continue the GSP Plus status yet it may be recalled that Mohammad Sarwar, former Governor of Punjab, who has since joined the Pakistan Tehreek-e-Insaf, played a pivotal role in the grant of the GSP Plus status to Pakistan. One would hope that his services are brought on board again and political differences not deemed to be the overriding concern of the government in not requesting his assistance.

Workers' remittances too have been declining in recent months - and this is a reflection of a worldwide trend sourced to the ongoing recession in countries particularly in the oil-rich Middle Eastern countries where labour is imported. To conclude, the rise in current account deficit is sourced to lower earnings from desired sources namely exports and remittances and there is a need for the government to focus on implementing policy changes that deal with this issue. Failure to do so would simply raise the country's indebtedness to even more unsustainable levels.

Copyright Business Recorder, 2017