November 01, 2023 (MLN): In the recent trade data, Pakistan's monthly trade deficit shows an increase of $0.6 billion on the back of a $0.8bn increase in imports.
On a yearly basis, the trade deficit is nevertheless contracting at a snail's pace of 4%. That's not necessarily bad news. Restrictions on imports have been removed under the IMF program as the economy gathers pent-up demand.
It is the exports which are showing positive indications. PkR has decreased nearly 35% YoY from PKR 220/USD to PKR 280/USD.
Exporters too were finding it difficult to import raw materials, machinery and intermediary goods last year. Thus, a 14% YoY growth in exports from $2.4bn to $2.7bn is heartening, if the trend continues.
Lately, SBP has taken various steps to encourage exports. In the recent gas price hike episode, exporters have been given competitive gas rates.
Although, gas-intensive industries would warrant more regionally competitive energy rates, but the intent is positive. Similarly, the convergence between the open market and interbank rate could be prompting flows from official channels.
Pakistan's economic miseries require two key corrections among a hundred others. Growing tax revenues and adding value-added exports. Depreciation alone can not be the answer to spur growth.
At the 8% Exports to GDP ratio, a comprehensive framework is needed where capitalists make much more money through exports and FDI than property, fixed income, currency and trading.
The trend is welcome and must continue to grow at double digits for 5 years.
The author is an independent economic analyst and writes on Twitter and Linkedin.
