Sadly, Secretary Finance reportedly gave a briefing to the participants and parroted the narrative of the past year and a half, ever since the current account deficit began to widen. Imports, he contended, increased due to a rise in machinery imports which, he claimed would fuel domestic productivity and consequently exports. As per SBP website imports rose from fiscal year 2014 to 2017 by roughly 6.9 billion dollars accounted for by: (a) a rise in food imports by 1.2 billion dollars, (b) metal by around 1 billion dollars, (c) transport a little less than one billion dollars at 984 million dollars, (d) textiles by 1.5 billion dollars, and (e) machinery by 2.8 billion dollars with power sector machinery imports rising by 915 million dollars and other unspecified machinery import rise by 1.1 billion dollars though there was a decline in agriculture and textile machinery imports. However, the secretary focused on the rise in textile machinery in July by around 9 million dollars and petroleum products largely accounted for by imports of gas from Qatar to 1.270 billion dollars in July as opposed to 578 million dollars in June of this year.
Exports, Secretary Finance maintained showed a 0.52 percent growth in July 2017 compared to July of the year before. The SBP website indicates that July-June 2016 exports were 21.9 billion dollars while in 2017 the figure was 21.65 billion dollars. Data for July 2017 was not available on SBP website and given the discrepancy between the Pakistan Bureau of Statistics (PBS) and SBP data one wonders whether the discrepancy as pointed out in the SBP first quarterly report last year has narrowed in recent months as it had noted that the divergence in data between the two entities has risen to over 3 billion dollars during the past three to four years while previously it was around 1.5 billion dollars at most. And finally, a 16 percent rise in remittances was highlighted as a step in the right direction though with the Arab countries still in a state of recession one wonders if this upswing is sustainable.
Be that as it may, the outcome of the meeting was a rather inane directive by Dar to the secretaries of finance, commerce, and textiles to remove the impediments that hinder achievement of growth targets. There was no mention of the four-year-long flawed policies by the Finance Ministry that accounted for a rise in the current account deficit - policies that include (i) an overvalued rupee that acts as a disincentive to our foreign buyers (while high end textile sector noted that an overvalued rupee helps its exports given that the electricity tariff is in dollars and cents), (ii) the rising non-payment of sales tax refunds that is creating liquidity issues for our exporters, and (iii) last but not least, the export package announced in January this year to deal with falling exports has the condition of incentivizing only those export units that show a 10 percent rise in exports - a condition that exporters maintain would render the Rs 180 billion package as remaining largely unused.
One can only hope that Prime Minister Shahid Khaqan Abbasi, unlike his predecessor, looks at the real impediments to exports and prevails upon his Finance Minister to revisit the government's policies and take appropriate action.
Copyright Business Recorder, 2017