The new trade policy, announced by the federal government for the next five years, is likely to boost trade and help overcome the growing trade imbalance if executed properly and targets are achieved. The policy sets an ambitious target of $31.2 billion targets under the new strategic trade framework for the ongoing fiscal year, which goes up to $37.88 billion for 2022-23, $45.81 billion for 2023-24, and $57.3 billion for 2024-25. The analysis of the policy shows that in addition to the seven traditional sectors of export during this period, textile, surgical instruments, leather products, sports goods, carpets, rice, and utensils, 11 more sectors will be added to the priority export list. These sectors include engineering equipment, the auto sector, pharmaceuticals, marble, minerals, processed food and beverage, jewelry, chemicals, meat and poultry, fruits and vegetables, seafood, and services. The promising thing is the policy has abolished the duty on exports which will encourage investors. The government’s keen interest in implementing the new trade policy is evident from the fact that for this purpose, a National Export Development Board will be constituted under the chairmanship of Prime Minister Imran Khan and the private sector will also be given representation on the board.
For years, no such policies were introduced despite the fact country’s exports were increasing, but not in proportion to the volume of imports.
The latest State Bank of Pakistan data shows that the country’s current account deficit has reached $7.7 billion in the last five months, which is mainly due to rising imports. The trade deficit widened by 5.3 percent in those five months and is unlikely to decrease due to rising import bills. The government’s efforts to cut the bill have brought no results so far, even though exports are increasing year by year which has been recorded up to 27%. It is believed that the trade deficit could reach $15 billion by the end of this fiscal year, up from $7 billion. This has also depleted foreign exchange reserves, which is having a negative impact on the exchange rate and the rupee is depreciating against the dollar. Among other factors, the lack of foreign exchange is said to be due to the failure of the projected loan from the IMF. Nor could Sukuk bonds be issued to raise more than $1 billion from the international market. The IMF’s conditions for disbursement of loans are also affecting the exchange rate. Every problem stems from another one as the falling value of the rupee is the rise of inflation, which has a huge political outfall too, as was evident in the recently concluded phase one of the local government polls in Khyber Pakhtunkhwa. This is a complex issue that the government’s economic team needs to understand and take steps to overcome its negative effects. The new trade policy is expected to yield the desired results. However, the real decline in imports will come when all kinds of machinery required for industrial development will be manufactured domestically and the country will become self-sufficient in the production of wheat, sugar, and other food items.
