The potential exports growth according to government officials, is hindered owed to a lack of diversification in export goods. The trend of Pakistan’s exports of major items remains more or less the same having concentrated on three commodities such as leather, cotton manufactures and rice. These three categories account for 68.1 percent of total exports during July-March FY2023. Among these few commodities cotton manufacturers remain major contributors with 57.3 percent share in total exports, followed by leather (3.2 percent), rice (7.6 percent) and other items (31.9 percent).
This pattern explained that Pakistan’s export is still exporting few commodities. USA as far as the top export destinations are concerned, still remained the largest export market for Pakistan during July-March, FY2023. Exports to USA have moderately declined to 19 percent in July-March FY2023 as against 21 percent last year.
Similarly, Chinese share in exports during the period under review has declined to 8 percent. Statistics showed that exports declined by 9.9 percent during July-March FY2023 to $21.0 billion as against $23.3 billion in the corresponding period last year. The decline in exports was driven by both declining trends in export volumes and unit values. The decline in exports mostly occurred because of the inadequate performance of textiles and food groups. The decline was owed to the weak global demand and lackluster performance in the domestic economy.
Present statistics released by the Pakistan Bureau of Statistics (PBS) show a significant fall in the country’s exports by 12.68 percent in July 2023, as against to the previous month. Exports dropped to $2.057 billion during the first month of FY2023-24, down from $2.356 billion in June 2023, reflecting the challenging economic situation. The trade deficit on a positive note explained improvement by 13.35 percent on a Month on Month (MoM) basis, reaching $1.607 billion in July 2023, as against $1.863 billion in June 2023. During the corresponding period, this narrowing of the trade deficit can be attributed to a fall of 13.15 percent in imports, which amounted to $3.664 billion in July 2023, as against $4.219 billion in June 2023.
Examining the statistics on a year-on-year (YoY) basis, exports experienced an 8.57 percent fall, with July 2023 registering $2.057 billion worth of exports, in contrast to $2.250 billion in July 2022. These figures indicate the challenges faced by Pakistan’s economy in the context of international trade, and the Government of Pakistan may need to implement measures to boost exports and balance the trade deficit in the coming months.
It is also important to mention here, according to PBS Pakistan earned $935.172 million by offering dissimilar travel services in various countries in 2022-23. During the period under review, personal travel services grew by 86.48 percent, from $497.560 million the previous year to $927.872 million during July-May 2023. Among the personal services, the exports of health-related expenditure surged by 33.02 percent to $4.190 million from $3.150 million while the education-related expenditure also grew by 3.64 percent from $10.170 million to $10.540 million. The government has taken policy incentives to boost exports such as:
i. Regionally Competitive Energy Tariffs
a. Supply of electricity to five export-oriented sectors covering textiles (including jute), carpets, leather, sports goods and surgical goods at US cents 9 per kWh all-inclusive from August to September 2022 and Rs. 19.99 from October 2022 to June 2023 per kWh.
b. Supply of RLNG to five export-oriented sectors at US$ 9 per MMBtu all-inclusive during FY2023.
ii. Rationalisation of Import Custom Tariff
a. Continuation of duty-free import of cotton to bridge the gap between domestic production and consumption of textiles and apparel industry.
b. Continuation of duty-free import of textiles and apparel machinery.
c. Reduction/elimination of customs duties on the import of dyes and chemicals to incentivize the textiles and apparel industry.
- During FY2023 (July-March), Rs.25 billion has been paid to the exporters as Customs Duty Drawback.
- Customs Duties on more than 100 tariff lines were rationalized during the budget exercise as well as 37 tariff lines for the packaging sector, 10 tariff lines for the dyes sector, and 101 different tariff lines related to farm mechanization. In the Duty and Tax Remission for Exports (DTRE) Scheme, the utilization period for the exportation of imported raw materials has been extended from twelve months to eighteen months.
- Automation of Export Facilitation Schemes (EFS) such as Export Processing Zone (EPZ), Manufacturing Bond (MB), Export-Oriented Unit (EOU), DTRE, and Temporary Importation has been automated and operational under Web Based One Customs (WeBOC).
- To incentivise exporters, rupee-based discounting of export bills/export receivable was introduced under Export Finance Scheme (EFS)/ Islamic Export Refinance Scheme (IERS). This facility assists in offering early payments to the exporters by the banks against the export bill/ export receivable at the prescribed rates. This facility is available at both post-shipment & pre- shipment stages at rates ranging from 2 to 3 percent, depending upon the tenor of discounting.
- Digitisation of exports-related processes through Pakistan Single Window (PSW), PSW is an automated platform that provides a facility to all exporters and importers to electronically submit an integrated declaration at the time of exports and imports of goods.
- Formulation of the regulatory framework to facilitate exports of goods from Pakistan for sale through international platforms under the Business to Business to Consumer (B2B2C) model.
- To promote the use of digital channels and enhance operational efficiency and improve ease of doing business, the functions of EFS/IERS have been digitised. An online platform has been developed for the transmission of EFS-related information/data between SBP PBSC banks.