By Amir Khan

Pakistan's hopes of revitalizing trade with United States seem to be on shaky ground, as its merchandize exports plummeted during the first two months of the current fiscal year, reports WealthPK. The decline, primarily attributed to diminishing textile product exports, poses significant challenges for Pakistan's economic outlook. This alarming trend follows a gloomy Fiscal Year 2023, where exports to United States experienced a dismal drop of 14.45 percent from $6.92 billion in FY22 to $5.92 billion. “It's a far cry from the earlier period when merchandise exports were on the rise, and the US emerged as Pakistan's primary export destination,” Muhammad Saleh Ahmad Faruqui, Secretary Commerce, told WealthPK.

According to the State Bank of Pakistan data, exports to the United States plummeted by a staggering 23.77 percent from $1.22 billion in July-August, 2023 to a mere $0.934 billion in the same period of 2024. He pointed out, “The decline in exports can be attributed to a confluence of factors, each contributing to the mounting challenges faced by the Pakistani exporters. Dearth of capital has constrained the businesses' ability to invest in their export operations. Delays in receiving sales tax refunds, deferred sales tax payments, and income tax refunds have added to the woes of the business community.”

He added that the commerce minister had finally announced the release of Rs31 billion to the exporters in sales tax refunds. This is a welcome development for the export sector, which has been eagerly awaiting this announcement. The secretary commerce said the ministry's promise of regionally competitive energy prices for exporters remained a paper proposition, as little progress has been made towards its realization. Moreover, the duty drawback on local taxes and levies has only made it harder for exporters to compete. Unavailability of technology upgradation fund has also hampered the businesses’ ability to modernize their export processes.

Faruqui highlighted, “To tackle these challenges head-on, US Ambassador to Pakistan Donald Blome has been proactive in engaging with Pakistan's finance and commerce ministers. These meetings have centred around the mutual objective of bolstering trade between the two nations.” He further said that the Investment Promotion Activity (IPA), a five-year project that will be carried out by the United States Agency for International Development (USAID), has been started by both nations to rekindle their trade relationship.

He emphasized that the IPA aims to strengthen Pakistan's business environment, improve the capabilities of investment promotion institutions, draw in foreign direct investment (FDI), and encourage more trade and investment between Pakistan and United States. By enhancing Pakistan's capacity for investment promotion, the project ultimately aims to lower the barriers to trade and investment.

He said that these initiatives and interventions will be closely monitored for their effectiveness in reversing the current downward trajectory and fostering renewed economic growth and prosperity for the country as Pakistan struggles with declining exports to its once-thriving partner.

Credit: INP-WealthPk