Current account balance of foreign trade has registered a moderate surplus of $99 million in October whereas it witnessed a deficit of $284 million in the preceding month of September and $1280 million in the same month last year. The surplus in merchandise trade has come after four years of massive deficit that confronted the country with balance of payment crisis and short term commercial loans worth 20 billion on high rate interest were acquired by previous government to pay the swelling import bill. The reduction in the current account deficit in the first quarter of the current fiscal year is 73.5 percent.
The Prime Minister Imran Khan, in a tweet, attributed the significant improvement in this macroeconomic indicator to economic reforms enforced by PTI government which have set right the direction of the economy. He urged the exporters to do more for boosting exports, which witnessed a growth of 3.8 percent in the first quarter of the current fiscal year. Earlier, similar views were expressed by the Advisor on Finance Dr. Abdul Hafeez Sheikh in his interaction with senior TV anchors, saying that economy will get further strength in the coming months.
Although the external sector is gradually showing recovery from long term deficit, however, the four months data of current account reflect a deficit of $ 1.5 billion. The primary driver of narrowing trade gap is the sharp decrease in imports, which dropped to $14.64 billion in the first quarter of current fiscal year as compared with $ 19billion in the same period last year. Exports of goods increased to $ 8.22 billion as compared with $ 7.9 billion. Exports of services show paltry increase and is offset by proportionate increase in their imports.
The trade policy with imports compression as dominant ingredient has been criticised by business community and political leaders, saying that it has slowed down the overall economic activities which will ultimately hit GDP growth. But the argument is partially correct as the government has restricted the import of luxury and unnecessary items of export. The imports of industrial raw material and intermediate goods for export oriented industries have fallen due to the rising cost caused by currency devaluation. Had a long term industrial policy been formulated for setting up industries of manufacturing raw material and intermediate goods the economic activities in the large scale and medium scale industries would not have been impacted. The 28 percent jump in the export of cement is achieved as the industry consumes the locally available raw material except imported high quality coal in the fuel mix. Currency depreciation worked as catalyst for increasing exports of cement in addition to its quality edge in the international market. Hence the demand of business leaders for the implementation of long term industrial policy is justified.
Exports from the country may get spurt when phase-2 of free trade agreement with China will become operational from December 1, allowing duty free access of textile, engineering goods and fruits. However, these products will still face competition from identical products from some South Asian countries by virtue of their quality and product innovations. The direction of exports is still focused on the existing trading partners as during the past one year efforts have not been made to diversify export market in Africa, Latin America and countries of Eastern Europe. Sometimes export of inferior quality of primary commodities bring misnomer for Pakistan. Last year Kenya refused to allow downloading cargo of rice which was imported from Pakistan. Further import orders were also cancelled. The Prime Minister has asked the exporters to boost exports for which quality improvement and competitive price is inevitable. But prices of our export products can be lowered only when state-of-the-art technology is inducted in the manufacturing sector and tariffs of energy inputs is made affordable.