Pakistan’s merchandise exports have suffered yet another blow, registering a sharp decline for the 11th consecutive month in July 2023. According to data released by the Pakistan Bureau of Statistics (PBS), exports plummeted by 8.6 per cent year-on-year to $2.05 billion. The decline in export proceeds has raised concerns about the potential closure of industrial units, particularly in the textile and clothing sectors.
On a month-on-month basis, the situation worsened further, as the export proceeds contracted by 12.68 per cent in July alone. Throughout the entire fiscal year 2023, merchandise exports experienced a substantial dip of 12.71 per cent, falling to $27.54 billion from $31.78 billion in the previous fiscal year (FY22). This significant shortfall of $4.46 billion compared to the $32 billion target set by the government has added to the challenges faced by exporters.
The government’s projection of a $30 billion export target for the current fiscal year will be a daunting task given the consistent decline in exports and the absence of any concrete measures to address the root causes.
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Criticism has been directed towards the Commerce Ministry, as it remained conspicuously silent throughout FY23, failing to hold any meetings or issue statements to understand and resolve the export downturn. The Commerce Minister’s focus on frequent foreign tours without addressing the pressing issue of diminishing exports has raised eyebrows among concerned stakeholders.
Simultaneously, imports have also experienced a sharp contraction, plunging by 26.44 per cent to $3.66 billion in July from $4.98 billion in the corresponding month last year. On a month-on-month basis, imports declined by 13.15 per cent, indicating a slowdown in the domestic economy.
During FY23, overall imports fell by a staggering 31 per cent, reducing from $80.13 billion in FY22 to $55.29 billion. The government’s projection of a $58.69 billion import target for FY24 reflects a planned increase of $3.4 billion or 8.14 per cent.
To address the economic challenges and meet the requirements set by the International Monetary Fund (IMF), the government has eased import restrictions and declared that the State Bank of Pakistan will not hinder the opening of letters of credit (LCs) from July 1. This decision was a condition for reaching a Staff-Level Agreement with the IMF for a nine-month $3 billion Stand-By Arrangement.
The trade deficit, however, showed signs of improvement, decelerating by 41.16 per cent to $1.60 billion in July from $2.73 billion in the same month last year. The trade deficit for FY23 also witnessed a significant decline of 43 per cent, falling to $27.54 billion from $48.35 billion in FY22.
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The continuous negative growth in exports, with only a minor upswing in August 2022 due to a backlog of orders, has raised concerns about Pakistan’s ability to balance its external account. The decline in textile and clothing exports, which account for over 60 per cent of the total exports, remains a significant contributing factor to the overall export contraction in FY23.
As Pakistan navigates its economic challenges, the government faces mounting pressure to devise effective strategies and take immediate action to revive the exports sector and stabilise the nation’s external trade.
