Muneeb ur Rehman

The export targets set for the Fiscal Year 2023-24 show the government’s commitment to resolving the longstanding trade deficit. However, the targets are at risk due to the absence of regionally competitive energy tariff (RCET) rates for the export sector. Talking to WealthPK, Arif Mehmood, Chairman of Pakistan Textile Exporters Association (PTEA), said the cost of electricity supplied to the exporting industries was regionally uncompetitive. The high cost has rendered export products expensive in the global market. As mentioned by the Pakistan Economic Survey (PES), during July-March period of FY2023, exports decreased 9.9% to $21.0 billion from the previous year's $23.3 billion. This decline can be attributed to both a decrease in export volumes and unit values. The diminished performance is primarily associated with the underperformance of textiles and food groups, contributing significantly to the overall contraction in export figures. He said the cost of electricity in Pakistan was higher compared with regional competitors like India and Bangladesh. The industries oriented towards exports in Pakistan, such as textiles and sports, which are heavily dependent on maintaining competitive prices, encounter difficulties in upholding their pricing edge.

Consequently, this situation is resulting in a reduction in export volumes, as the international buyers opt for suppliers with low production costs reflected in lower prices. He underscored the worsening situation of the industrial sector. “It is worthy to mention that half of the SME textile export industries have already ceased production and closed their operations due to the economic uncertainties, significant fluctuations in the dollar/rupee exchange rate, and scarcity of essential raw materials required for manufacturing goods intended for exports”. Arif said the government usually took steps repugnant to the export sector on the directions of international lending organizations. “Exports cannot experience improvement unless the government reduces its reliance on borrowing from organizations and loans. Instead, it should prioritize self-sustainability by promoting and depending on the local business community and domestic resources”. The circular debt has surpassed Rs2.56 trillion, and the government is opting for the most convenient approach of burdening the industrial sector by eliminating regionally competitive energy tariff (RCET) rates, he said. To sum up, Pakistan may miss the export targets after the removal of RCET rates.

Credit: INP-WealthPk