Overwhelmed by imports.

As on quite a few other important issues, the opinion at the national level on how to reduce trade and current account deficits is sharply divided.

Some argue that import substitution should precede export-oriented growth as it is relatively a less difficult job than increasing exports at a marginal pace in the current global environment. For example, it is stated that 95 per cent of our edible oil needs are imported and boosting production in agriculture, if incentivised, is not as difficult as in some other sectors.

There is also a growing view that the country should opt for both export-oriented production and import substitution, taking advantage of its natural and abundant human resources. Some experts believe that exporters' income should be improved in the case of value-added exports and diversification of goods and markets, while the incomes of importers should be reduced. It is also necessary that imports of non-essential items be completely removed from the import list.

Finally, looking at the success stories of many countries and their export-oriented or export-led growth strategies, and notwithstanding the current fears of a global recession, others still strongly believe that the solution lies in export-oriented growth. That is, of course, also necessary to repay accumulating foreign debts that finance imports.

The production by foreign companies is not export-oriented and adds little or no value to the economy

The policymakers are focused on curbing imports through regulatory measures to reduce current account deficits, which, along with other factors, is contributing to partial cuts in production by automobile and tractor assemblers, the textile industry, etc, with fears that others may follow suit.

In a joint press conference on January 9, representatives of textile-related industries complained that export-oriented textile factories are being denied necessary raw materials and accessories. Letters of credit worth as low as $5,000 are being refused. This has caused disruption and led to the cancellation of export orders.

On the same day, pledges exceeding $10 billion were made by bilateral and multilateral donors for the next three years to help Pakistan recover from devastations caused by floods.

According to market perception, these funds, as and when disbursed, would provide a short breather and strengthen the depleting foreign exchange reserves for a while but will not change the fundamental of the economy.

Some Western...

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