Exports rise as Rupee falls, but what of the bigger picture?
IMF has repeatedly warned its most addicted borrower, the Pakistani leadership at any given time, to exercise fiscal discipline and restraint in key areas such as widening fiscal deficit, raising exports, improving tax collection, urgent structural reforms and meeting established economic targets. But, not being particularly robust on the unity and faith parts either, discipline, especially of the stringent financial variation, is well beyond the rulers’ will power, ability and taste. As recompense, the economy is subjected to ad-hoc short term measures which only worsen the overall situation. Or else the grandiose policies are empty talk, signifying nothing, such as the Rs 180 billion package to boost exports announced in January 2017.
Short cuts particularly close to our financial wizard’s heart are foreign currency reserves, for which sukuk and Eurobonds are sold at ruinous rates, pegging down the Rupee and tax amnesty schemes. But as deliberate policy or simply due to implacable market forces, the Rupee is slowly sliding against all major currencies, especially export-oriented ones. State Bank of Pakistan’s Statistical Bulletin shows that during January-March 2017, it fell 0.04 percent against US$, 0.89 percent against Chinese Yuan Renminbi, 4.62 percent against Indian Rupeeand 5.33 percent, 0.91, 5.3 1.44, 4.11 and 7.68 percent against Australian, Canadian and Taiwan dollar, Euro, Yen and South Korean Won respectively, with sanction-bitten Iranian Rial the only exception with a Rupee appreciation of 0.65 percent. In the region, only the Afghan Afghani fares worse than the Rupee, a dubious consolation.
The country’s exports witnessed a corresponding increase, rising by 3.4 percent to $916.9 million, 15.6 percent to $489.3 million with China, 2.6 percent to $88.5 million with India and 26.7 percent to $86.3 million with South Korea. But whether all this would lead to improved competitiveness of the economy and job generation is a moot question. What is certain is higher inflation and interest rates, and with the energy bill expected to rise by 30 percent, the economic planners will need to come up with something more substantive and innovative to survive.