Mian Anjum asks govt to put industry on priority for long-term current account surplus along with high growth
As the Pakistan’s trade deficit has expanded by 14.70% to $2.06 billion in Nov 2020, the apex chamber of the country has urged the government to focus on further accelerating exports and remittances, as the imports that were previously on a declining path, have now started picking up, indicating the growing economic activities but at the same time signaling the widening of the trade deficit too which is not good for the economy.
FPCCI President Mian Anjum Nisar stated that the economic managers were boasting of their performance on the plea of current account balance, which has witnessed a surplus for the fourth consecutive month in October, rising to $382 million. It is to be noted that back in Sept 2020 the current account had remained in surplus for the third month in a row at $73 million, making a history with a 17-year high surplus in the July-Sept quarter compared to a deficit of $1,492 million of last year’s same time on the back of 29 percent rise in exports and 9 percent improvement in remittances.
“But it should be kept in mind that the surplus emerged on the back of a sustained increase in remittances and a smaller trade deficit, as since the start of this fiscal year in July, the cumulative current account surplus has reached $1.2 billion, reversing the $1.4bn deficit recorded in the same period last year.
The FPCCI President was talking to a trade and industry delegation, who met him here in his office on Saturday.
He said that the country’s current account has been helped by a significant increase in remittances during the current fiscal year. So far, in the four-month period from July to Oct, total inflows of remittances have risen to $9.43 billion against $7.45 billion in the same period last year.
“To achieve consistency in current account surplus for a long period without compromising industrial growth the government will have to focus on increasing the exports and put the business and trade issues on priority, otherwise, the economic problems and balance of payment could further disturb with the growing trade deficit.
Mian Anjum Nisar said the low exports volume and rising trade deficit were chronicle issues which should be resolved permanently. He said exportable items should be produced in accordance with the international demand to fully exploit the benefit of GSP-Plus status. He said that several industries and sectors were neglected in past. He said decisions should be made in national interest, keeping aside the personal agenda. Mian Anjum Nisar called for a holistic approach to speed up economic growth, as COVID-19 has adversely impacted the world’s economy as well as Pakistan’s trade and industrial sectors.
The FPCCI President said the government has already missed its annual export target for the first two years. For the current fiscal year, the export target was reset at $27.7 billion, requiring at least 6 percent growth. He said the government has to formulate long-term and consistent policies for the revival of industry and considerable improvement in exports, as contrary to regional countries, Pakistan’s exports have remained stagnant during the past 40 years, and unless attention was paid to all factors that hamper industrial and exports growth, the country might not be able to achieve desired results. Some of the impediments to industrial growth include cost of production, poor governance, obsolete technology, lower productivity, lack of competitiveness, supply constraints, and energy issues.
He said that the current export portfolio is marred by a lack of diversification, as few products are exported by some exporters to limited markets. So, a major enhancement in exports requires huge and wide structural reforms.
Mian Anjum Nisar said that in 2019-20, the LSM output had fallen alarmingly by 10.17 percent yearly. The industrial production after suffering months of damage inflicted by the corona pandemic is now clearly reflecting a revival in economic activities in the country. For the current fiscal year, the government had set the economic growth target at 2.1 percent, which will be better in the current economic situation but is not enough to create jobs for a growing population.
He said that a quick turnaround can come from increasing competiveness of the existing export base and demand-led production of agricultural products, especially high value agriculture products.
The long-term strategy needs structural reforms of the entire export sector, including high tech and innovative products, value-added exports commodities and market diversification towards unexplored markets like South America and Africa.