ISLAMABAD: Pakistan’s merchandise exports dipped by 12.71 per cent year-on-year to $27.54 billion in 2022-23 from $31.78bn in the preceding fiscal year, showed data released by the Pakistan Bureau of Statistics on Monday.

The export contraction continued for the 10th month in a row, plunging by 18.72pc year-on-year to $2.36bn in June.

The export proceeds are declining because of internal and external factors stoking up fears about the closure of industrial units, especially textile and clothing.

The government has projected a $32bn target for the outgoing FY23. However, the export target was missed by a wide margin of $4.46bn.

Throughout the entire fiscal year, there was a conspicuous absence of any statements or meetings within the commerce ministry to address the causes behind the decline in exports and propose solutions to assist exporters.

The commerce minister’s engagements primarily consisted of frequent foreign tours, while failing to make any public statements regarding the diminishing exports.

Trade gap narrows 43pc to $27.54bn in FY23

At the same time, imports also plunged by 46.80pc to $4.18bn in June compared to $7.85bn in the corresponding month last year. Imports fell 31pc to $55.29bn in FY23 from $80.13bn in FY22.

The government has placed curbs on luxury and non-essential goods since December 2022 and only encouraged imports of raw materials, semi-finished products, pharmaceutical products, food and energy products. As a result, the import bill saw a deep drop in FY23.

The government has now relaxed the import restrictions and announced that the State Bank of Pakistan will not use any measures to slow down or restrict the opening of letters of credit (LCs). This was also one of the conditions before reaching a Staff-Level Agreement with the IMF for a nine-month $3bn Stand-By Arrangement.

The trade deficit decelerated by 43.03pc to $27.54bn in FY23 from $48.35bn in the preceding fiscal year. In June, the trade deficit fell year-on-year by 63.32pc to $1.81bn.

The exports started posting negative growth in July 2022, barring August when a slight increase was recorded because of the backlog of the preceding month. Export contraction is a worrisome factor, which will create problems in balancing the country’s external account.

The drop in textile and clothing, which constitutes over 60pc of total exports, was one of the main factors for the decline in overall exports in FY23.

Textile exports were declining due to the federal government’s lack of strategy and inability to prioritise effectively, said the exporters.

The faster refund system was not functioning as intended, with refunds now taking 3-5 months to process instead of the promised 72 hours. Additionally, the sector is facing a substantial increase in financial and energy costs, lamented the exporters.

In FY23, it became difficult for exporters to import raw materials and procure other inputs locally. The central bank imposed restrictions on LCs which led to a decline in exports, they remarked.

Published in Dawn, July 4th, 2023