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For bearish Pakistani exporters, IMF deal is no silver bullet

Pakistan's once robust textile industry now facing uncertainty

Pakistan, which is in the midst of an economic crisis, has recorded a 12.7 per cent decline in exports for the July to June period—country’s financial year. During this period, the country’s exports were recorded at $27.74 billion compared to $31.782 billion in the previous financial year. The steady decline in outbound shipment will cause worries for the Shehbaz Sharif government, even as it managed to seal a $3 billion financial assistance package from the International Monetary Fund (IMF).

Export growth is critical for Pakistan’s economy as this would then generate jobs, boost foreign exchange reserves and stabilise the local currency.

However, what has irked the country’s business community is the marked indifference reflected in the government’s attitude. Islamabad has imposed several import restrictions which include essential raw materials as well. Along with the surge in prices and shortage of raw materials due to stringent import restrictions, the fuel and power crisis hit the country last year impacting businesses. The worst impacted were the small and medium enterprises.

The country’s textile sector—one of the largest money spinners for the economy, is stressed too, operating almost 50 per cent less than the capacity utilisation. Last year’s devastating floods affected cotton production with domestic output of this all-important crop declining to a four decade low of 4.9 million bales. In 2004-05, cotton production in the South Asian country touched 14.1 million bales. While the output averaged around 11 million bales after that, the output eased to 7 million bales in 2020-21 and about 9.45 million bales in 2021-22.

Notably, Pakistan’s exports to China in the just concluded financial year have dropped too—by about 25 per cent. China has been one of the top export destinations of Pakistan. Apart from China, Pakistan exports to its other neighbours including Afghanistan have also remained muted.

Local newspaper Dawn said that “throughout the entire fiscal year, there was a conspicuous absence of any statements or meetings within the commerce ministry to address the causes behind the decline in exports and propose solutions to assist exporters.”

“The commerce minister’s engagements primarily consisted of frequent foreign tours, while failing to make any public statements regarding the diminishing exports,” it said.

The country needs to boost its exports to revive its sagging economy. While it has got a breather from the IMF, it needs to put its house in order at the earliest.

Also read: Pakistan gets IMF breather, but economic crisis is here to stay