- The trade figures point to the real flaw
The foreign trade figures for December are not heartening, for they showed a 32 percent increase in the trade deficit year-on-year to $2.7 billion, which has meant that the deficit for the current fiscal year’s first half is $12.4 billion, up from last year’s $11.7 billion. At this time last year, the covid-19 pandemic had not yet struck, so while international trade had not yet been depressed, oil prices still put pressure on the import bill. While exports may have recovered to pre-pandemic levels, it seems that so have imports, with the result that the trade deficit is going beyond the limits estimated.
Meanwhile, instead of taking a broad-based approach, the government is poised to give Rs 960 billion incentives to the textile industry in the hope that this will boost imports of something that Pakistan is already exporting. The proposals in the draft Textile Policy propose not just subsidies and duty drawbacks and sales tax refunds, but cheaper power. How this is to be done in view of the circular debt crisis in the power industry, has not been spelled out. That particular problem has got the IMF on the brink of cancelling its ESAF with Pakistan. Circular debt has ballooned to Rs 2.3 trillion as of November 30, up Rs 156 billion this fiscal year, and there seems no end in sight.
Instead of taking hard decisions, like much-needed reforms in the FBR and ending tax exemptions granted to influential lobbies, the Prime Minister seems to drift off into fantasy. He devoted himself to a meeting of the Apex Committee on Economic Outreach, which was told by National Security Advisor Dr Moeed Yusuf that a ‘mapping exercise’ had identified a potential of an additional $31 billion in goods, and $2 billion in services. If that could be realized, that would probably solve Pakistan’s foreign exchange woes, but the government should not count that money as being in its coffers. The government has already shown a penchant for fantasy in economic policymaking, and it should not be encouraged to indulge any further.
