The October slowdown in textile exports is not really alarming once you explore its underlying reasons – chronic energy shortage to industry and inability to expand owing to an un-accommodative monetary environment. The surprise at the slowdown is quite alarming, though, especially when it registers with government functionaries. Immediately following the budget announcement, we repeatedly pressed for increased patronage to both manufacturing and industry, and the underlying need to incorporate value addition into the export mix. Yet little changed despite the finance ministry’s ambitious budgetary projections, and near-criminal power shortage continued to compromise production savagely.
If things weren’t bad enough, the tight monetary stance ruled out whatever little hope of stimulating investment and expansion remained. And even with the phased central bank rate cuts, the government is overwhelmingly present in the borrowing market, still crowding out the private sector. With the government’s other main revenue generation arm, tax collection, still shy of crucial reforms, Islamabad’s fiscal condition is about to change from bad to much worse.
It’s not just that fiscal authorities have hit a road-block half way through the fiscal. There were signs right from the beginning that the time-buying bandwagon the government had decided to step on was running on borrowed time. So once again important targets will be missed, and no matter what authorities say, there will again be painful cuts in the development budget. And since the gloomy picture owes to the government’s inability to even protect its small export basket, one thing Islamabad cannot claim presently is a prudent, medium-to-long-term outlook. Six months of continuous reminders have had little affect on the government. It is hoped that the export shock will at least push it into a more proactive posture. Failing that, nothing short of the ballot box will bring some sense where it is needed.