Editorial
The surge in Pakistan’s exports during July-June 2024, rising to 30,645 million dollars from 27,724 million dollars the previous year, is a substantial increase of 10.54 per cent in dollar terms. However, two critical observations stand out.
Firstly, the total export figures of the last fiscal year were influenced by the flawed economic policy of the former federal government, which artificially controlled the rupee-dollar parity, leading to multiple exchange rates and prompting the IMF to refuse to reach a staff-level agreement. This policy also resulted in a notable decline in remittance inflows, as Pakistani remitters returned to the illegal hundi/hawala system. This decline in remittance inflows had a significant impact on the economy, affecting the balance of payments and the overall economic stability.
Comparatively, the fiscal year 2021-22, when exports peaked at 32,492 million dollars, may be a more suitable benchmark, showing a 6 percent decrease in 2023-24.
Secondly, the rise in exports was not in value-added items but primarily in vegetable products, with exports increasing by 74 percent from 2.9 billion dollars in July-May 2023 to 5.06 billion dollars in the comparable period of 2023-24. Notably, cereals, oil seeds, oleaginous fruit, and edible vegetables showed significant export increases, while other export groups experienced declines.
It is speculated that the exports of these vegetable items may have contributed to the persistent high inflation. The positive aspect is that the trade deficit has decreased from 27.4 billion dollars in July-June 2023 to 24.089 billion dollars in the current year, indicating a decline of 12.32 percent. This reduction is attributed to a larger increase in exports and a decline in imports. However, the decline in imports, while beneficial for the trade deficit, may have impacted the performance of the large-scale manufacturing sector, particularly those industries that rely heavily on imported raw materials or components.
However, the heavy dependence on weather conditions for farm output, combined with Pakistan’s vulnerability to the impacts of climate change, suggests that vegetable exports should not be relied upon as a major source of export revenue. This underscores the urgent need for the government to critically evaluate the composition of exports and develop a dedicated export sector focused on high value-added products that are less reliant on domestic farm output for their key input. The time to make this strategic shift is now.
