Pakistan's Trade deficit widens 4.22% to $15.1 Billion
Pakistan's reliance on external borrowings expected to grow further, as exports continue to decline.
Dunya News Report (Humaira Sajid)
ISLAMABAD – The trade deficit – gap between exports and imports – widened 4.22% to $15.1 billion from July to February, reported the national data-collecting agency.
Despite the tremendous plunge in global crude oil prices, Pakistan’s trade deficit worsened to $15.1 billion in the first eight months of the current fiscal year as the value of imports, for the first time, was more than double the value of exports.
The Pakistan Textile Exporters Association (PTEA) said there has been drastic downfall of 14.4% in exports of the country since July 2015 whereas exports of the competing country Bangladesh has increased by 8% in the same period.
“It is worrisome that balance of payments position worsened despite fall in crude oil prices,” said Dr Hafiz Pasha, a former finance minister.
For the record, it has happened for the first time in the country’s history, Dr Pasha stated, that the import bill was more than a double of the export bill. Something is seriously wrong with the economy that the government has to find out, Pasha said showing his concern.
The country’s total exports declined to $ 12.087 billion in the first seven months of the current fiscal year (Jul-Jan) 2015-16 from $ 14.115 billion during the same period last year. A member of the Karachi Chamber of Commerce and Industry (KCCI) said the government without perceiving the significance of time has wasted seven months of the current fiscal year and is still yet to release the trade policy and the new auto policy.
He said the federal government or the Trade Development Authority of Pakistan (TDAP) is doing nothing for the exporters as factories in Punjab and Sindh are still waiting for supply of electricity despite the declining furnace oil prices in the international and local markets.
The PTEA while issuing a press statement said: “5% of the export revenue gets stuck up in present refund regime of which resultantly massive working capital has been stuck up which is the major cause of export decline,” PTEA said. “Refunds of goods exported 12 months earlier are still outstanding”, the statement added.
“Electricity cost for industrial production is highest in the region. The honorable Prime Minister very kindly announced a relief of Rs. 3/Unit in electricity bills for January 2016 at Rs. 11.08/Unit which is Rs. 0.84/Unit higher than December 2015,” lamented PTEA in a media statement.
While describing the terrible state of Punjab based textile industry because of fuel gas deprivation, PTEA complained for being charged above the settled price for Regasified Liquefied Natural Gas (RLNG). As per international prices RLNG should be USD 5-6/MMBTU however the government had taken a kind action to supply 17% RLNG as lifeline to PTEA for 52 days at agreed price of USD 9/MMBTU but on ground PTEA was outwit and charged USD 10.68/MMBTU and more.
The Finance Act 2015-16 and textile policies 2009-14 & 2009-19 still remains redundant as the textile industry is deprived of the incentives announced in the act.
In February 2015, the government announced Textile Policy (2014-19) envisaging doubling textiles exports from current $13 billion to $26 billion in next five years focusing on value addition and creating three million new jobs. For the implementation of policy, a financial package of Rs64.15 billion was also approved. To resolve the various issues pertaining to textile sector and for implementation of Textiles Policy 2014-19, the government had restructured the Federal Textile Board with majority members from the private sector.
In order to facilitate and incentivize the investments in plants and machinery, Technology Up-gradation Fund Scheme was announced to be launched in the FY 2015-16, as per the provisions of Textiles Policy 2014-19. However, the textile industry still awaits the issuance of the textile package to make them competitive in the region.
The government manifested its commitment to introduce latest seed technology. To this end, the National Assembly passed amendments in Seed Act, whereas Plants Breeders Right Act was to be promulgated on priority basis. Declaring the energy crisis to be the biggest factor restricting production growth PTEA requested in their statement for the immediate release of working capital which is stuck in refund regime.
PTEA has put forward its requests to the government for the rescue of dying textile industry and hard earned export markets as well as saving the jobs of millions. Following are the points raised by PTEA:
1. The government should allow the zero rating on export value chain (No Tax-No refund) in order to boost the export growth.
2. Bring down the cost of production and provide competitive edge in the region.
3. Ensure energy supply at competitive rates.
All Pakistan Textile Mills Association (APTMA) demanded the government late in January to wave off customs duty on cotton imports while provision of five percent rebate on textile products export. The textile mills association Chairman Tariq Saud said that at least 110 factories are shut at the time. He said that as many as 40 mills could open on immediate basis if the government imposes ten percent duty on import of artificial yarn and clothes.
Islamabad Chamber of Commerce and Industry (ICCI) had also expressed its concerns over the falling exports of the country which have dwindled in the first half of the current financial year and called upon the government to take urgent remedial measures to arrest the hazardous trend that has now created balance of payments crisis and increased current account deficit.
The ICCI asked the government to reconsider its imposition of duty on import of raw materials, take measures to bring down cost of inputs by reviving zero rating for exports and release funds to exporters because without taking these steps, the chances of turning around falling exports and paving way for export-led growth of the country appear vague .
