The persistent balance of payment (BOP) crisis has stymied economic growth and limited the country’s ability to pay external debt. “The usual response of imposing restrictions on imports to improve the BOP is not feasible; therefore, the country needs to focus more on export growth rather than on import compression,” stressed Muhammad Zubair, Chief Executive of Trade Development Authority of Pakistan (TDAP). Talking to WealthPK, he pointed out that many industries in Pakistan relied on imported raw material and intermediate goods for their production processes. “This is particularly true in sectors such as textiles, chemicals and manufacturing. As a result, a significant portion of the value of exported goods consists of imported inputs.” The table below shows the persistent current account deficit of Pakistan over the years. When the government compressed imports during 2023, the current account deficit reduced, but at the cost of low GDP and high unemployment. Zubair emphasised that a boost in exports could effectively tackle the BOP crisis in Pakistan. “Through the expansion of its export portfolio and the enhancement of trade performance, Pakistan has the potential to generate foreign exchange.

This, in turn, can be utilised to confront the deficit, diminish reliance on external borrowing and bolster fiscal stability.” While explaining the positive relationship between imports and exports, he said, “Many industries operate within global value chains, where different stages of production take place in different countries. In such scenarios, even if the final product is exported, a substantial part of its value is added through imports of components or services from other countries.” The TDAP chief shed light on the importance of imports for the export of products in the large-scale manufacturing (LSM) sector of Pakistan. “The manufacturing sector heavily depends on imported raw materials, and any effort to restrict imports will hamper domestic productivity and escalate unemployment rates.” He emphasised that a dedication to growth driven by exports, coupled with the subsequent liberalisation of trade barriers, would foster a rise in foreign direct investment and other investments from abroad. “This will eventually help the country maintain the BOP.”

Credit: Independent News Pakistan (INP)