By: Ammar Awais
The Challenge Ahead
In spite of the recent challenges faced by Pakistan’s economy, there is a sense of economic optimism in the country, driven by the $62 billion China-Pakistan Economic Corridor (CPEC). However, certain measures need to be taken to reap maximum benefits out of CPEC projects, one of which is to ensure robust, export-led investment in the manufacturing sector. According to experts, the annual outflows to the Chinese investors under CPEC projects are expected to average $2.5-3.0 billion in the coming years, while the IMF has estimated these outflows to peak at $4.5 billion by 2024, and then decline gradually. It is, hence, vitally important for Pakistan’s exports to grow at a steady pace to avoid further depletion of the country’s foreign exchange reserves, and to keep the balance of payments in check.
Manufactured goods have continued to comprise a major portion of Pakistan’s exports, accounting for about 73 percent of the total export value in 2016-17. The textile industry, in particular, remains integral to Pakistan’s international trade. Various textiles-related commodities, such as cotton fabrics, cotton yarn and threads, knitwear and bedware are some of the biggest exports of the country. Other important exports include rice, leather, fish and fish preparations, fruits and vegetables, woollen rugs and carpets and sports goods.
Pakistan’s exports are largely concentrated in relatively few countries. The United States is currently the biggest export destination for Pakistani goods, accounting for over 16 percent of the country’s total export value in the second half of 2017. The US is followed by the United Kingdom, China, Afghanistan, and Germany as largest buyers of Pakistani products, collectively making up a further 28 percent of export value. Other important export destinations include Spain, the Netherlands, Belgium, Italy, UAE and Bangladesh.
In recent years, Pakistan has struggled to increase, or even maintain, the level of exports, leading to a highly negative balance of trade. In the fiscal year 2017-18, the country’s total exports were valued at $23.2 billion while the imports were recorded at nearly thrice that value at $60.9 billion, resulting in an unprecedented trade deficit of $37.7 billion, and seriously depleting our foreign exchange reserves. According to one report, 45 Pakistani products have lost competitiveness in the international market since 2013.
A close look at Pakistan’s export figures in recent decades reveals an inconsistent growth pattern. While the general trend for export value has been upward, the country has struggled to maintain consistent growth for a considerable length of time. However, it is in the past seven years or so that the export performance has been particularly disappointing. The total export value stood at $24.8 billion in 2010-11, but it failed to achieve any meaningful growth in the ensuing years, and declined sharply in 2015-16 to $20.8 billion. While the exports grew to $23.3 billion during 2017-18, this increase was drastically overshadowed by the much larger increase in imports – from $52.9 billion in 2016-17 to $60.9 billion in 2017-18, thus further deteriorating the balance of trade.
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