A BIG increase in exports amid a decreasing trend in imports and lower-than expected trade deficit, came as good news for the economy in September. Textile and clothing exports showed a double-digit expansion.

Sustained high growth in home remittances was also witnessed in the entire quarter ending in September. As a result, the current account showed a surplus despite continuous decline in foreign investment.

At a time when exports of big neighbours like China and India are not growing at the rate seen last year, a 22 per cent plus expansion in Pakistan’s export earnings in the last month stunned many analysts. And what a surprise it was to see textile exports posting a 13 per cent growth after witnessing a decline month after month for almost a year! Low cotton prices, on accelerated arrivals of new cottonseed into ginneries and possibility of greater access to European markets under special trade concessions from next month may help sustain growth momentum in textiles.

Ginneries across Pakistan recorded, up to October 15, a big 14 per cent increase in cottonseed arrival. In Punjab cotton output remained lower than in the comparable period of the last year “mainly due to extended pre-monsoon spell of strong winds that striped taller cotton plants off cotton bolls,” according to Ibrahim Mughal Chairman of Agri Forum Pakistan.

But a phenomenal 63 per cent rise in output in Sindh more than compensated the fall in cotton output in Punjab. According to people associated with cotton trade, this year’s total crop may hit a new all-time high mark of 15 million bales.

September’s exports of $2.2 billion were not only contributed by a surprise expansion in textiles’ earnings but also helped by a phenomenal rise in exports of jewellery which fetched a record $400 million. Overall jewellery exports in the first quarter also tripled to $740 million.

The amount was no less than seven per cent of overall exports. In the category of non-traditional items its has emerged the second largest foreign exchange earner after textiles, far ahead than rice.

Jewellery exporters say that innovative designing and diversification of export markets are the two main drivers of jewellery exports. “We are now exporting jewellery not only to the traditional market of the Middle East but also to China, India, Egypt, Bangladesh and the Central Asia as well,” boasted Muhammad Hanif, a Karachi-based exporter.

An official of Pakistan Gem and Jewellery Development Company said jewellery exports during this fiscal year could reach close to $2 billion, double from the previous year. He said the role of his company was instrumental in training goldsmiths and in promoting innovative designing besides marketing Pakistan’s jewellery through holding exhibitions.

In the first quarter, inflow of foreign direct investment further slowed down. However, strong corporate earnings attracted investment in equities pushing up portfolio investment to a shade less than $100 million.

Inflation in September fell below nine per cent and average inflation of the first quarter remained slightly above this level, raising hopes for meeting the full fiscal year inflation target of 9.5 per cent. While making a 50-basis points cut in its key policy rate, the State Bank of Pakistan had also said that meeting the inflation target for FY13 had become a possibility.

The recent lowering of domestic fuel oil prices and ongoing retirement of the federal government’s borrowing from the central bank has further brightened the scope for it.

Up to October 12 of this fiscal year, the federal government retired Rs194 billion of the SBP’s inflationary credit but on the other hand, it did so only after borrowing Rs496 billion from commercial banks. Retirement of central bank’s credit (which is always most inflationary in nature) by borrowing more from commercial banks was done to keep inflation in check and, at the same time meet, all fiscal obligations. But fiscal woes cannot be contained on a permanent basis unless tax revenue is increased.

On this score, the government’s performance still remains poor. In the first quarter, total tax revenue stood around Rs409 billion which fell short by Rs28 billion in meeting the quarterly target of Rs437 billion. One silver-ling in the area of least or non-inflationary borrowing has emerged with a record Rs150 billion investment in National Savings Scheme during the first quarter, which is almost three times the target of Rs56.5 billion.

Another weak-performing sector is large-scale manufacturing. LSM grew less than one per cent in the first two months of the current fiscal year. Industrialists blame prolonged power crisis and poor law and order situation in Karachi for slower-than-desired growth in industrial output.

Production of motor spirits, high speed diesel, furnace oil, lubricating oil and LPG went up in July-August which reduced the overall decline in petroleum products’ output to less than half a percentage point. Other items whose production recorded an increase were paper and board, soda ash, caustic soda.

Cement production remained almost intact at the previous year’s level with a nominal 0.2 per cent decline but fertilisers output fell drastically. Overall output of steel products declined 20 per cent but that of hot and cold rolled iron sheets showed a phenomenal increase. Cars’ and trucks’ manufacturing slumped but production of commercial vehicles, buses, and tractors went up. In food items, both cooking oil and vegetable ghee witnessed substantial growth in production.