Nascent recovery widens trade deficit.

Byline: Jawaid Bokhari

With regulatory measures to curb it virtually exhausted, the import of industrial raw materials/inputs is picking up, signalling the arrival of nascent economic recovery and widening the trade deficit. Wheat and sugar imports to meet domestic shortages or build strategic reserves are an added factor.

Once again imports, recorded at $5 billion last month, have begun to cater to the domestic demand with no notable progress in import substitution.

Instead, the duties on industrial raw materials are being gradually reduced. The prime minister's advisor on commerce Abdul Razak Dawood says a study carried out by the ministry shows that when duties on raw materials decrease, industrial activities gain momentum and revenue collection also increases.

He stated that the real target of the country is to achieve sustainable growth in exports which is good one year and not the other year. And he adds: this can be attained only if, as the official study shows, the trajectory for economic growth is on the higher side for 10-15 years.

An under-valued rupee has resulted in adverse terms of trade and stepped up the transfer of resources abroad with the export of more goods fetching fewer dollars

On the basis of the actual performance so far during the current fiscal year, the outlook for manufacturing and exports seems a bit promising but challenges remain. The State Bank's economic growth projection in the range of 2-5 per cent is subject to the downside risks of the second wave of the pandemic.

Large-scale manufacturing (LSM) output rose by 7.4pc during July-November on the back of sustained growth momentum for the third successive month. Exports grew at 4.9pc in the first half of the current fiscal year with an unusual surge in November and December. But the growth in both manufacturing and exports is not broad based. First, take manufacturing: of the 15 major manufacturing sectors, 10 recorded positive growth while five sectors contracted.

The LSM production in November swelled by 14.5pc, which, according to Planning Minister Asad Umar, was the highest in 12 years.

However, manufacturing has not yet reached pre-Covid-19 production levels. In November 2020, the output index improved to 147.3 points but was below the level of 160.2 recorded last March.

According to the latest monthly trends, in December exports surged by 18.3pc to $2.3bn but were outpaced by imports which soared by a little over 32pc to reach $5bn.

The trade deficit...

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