Job half done

LAHORE: The expected relief in petroleum rates may be short-lived because of the increase in global crude oil rates after the Hamas-Israel war. The war, if continued for a while, would further escalate oil prices.

The Pakistani economy is currently susceptible to numerous global factors. Even though there is a constant appreciation in rupee value that is making imports cheaper, increase in global commodity rates would hurt sentiments in Pakistan.

The action against currency speculators has brought down the dollar to below the level when caretakers assumed power. If the dollar downslide against the Pakistani rupee continued as envisaged by the economic planners we may see a cut in prices of numerous items. The exporters though would lose a sizable chunk of their income if the dollar rate comes down to Rs250.

Another blow to the dollar would come when the goods banned under Afghan Transit Trade finally stop. The need to send dollars for the purchase of those would no longer be there.

These goods were actually meant for the Pakistani market and were dumped in the country instead of going to Afghanistan. We might see the rates of tea, imported TV sets and other electronics increase and Pakistani products become competitive.

Global conditions would not impact this scenario as long as the authorities in Pakistan continue to monitor unethical trade transparently and fairly. Afghan rupee value would be the litmus test in this regard that officially exports goods worth $1.5 billion and imports five times more.

Local currency in any other country would have touched the roof if it operated with this huge trade deficit. Another thing is that the landlocked country has no other source of foreign inflows.

Even its remittances are nominal. But even after one month of operation by Pakistani authorities the Afghani’s value remains stable. It did touch 79 Afghani against the dollar on September 12, but has since declined to 75.43 against the dollar on October 11.

But perseverance by Pakistani authorities would make rupee stronger and Afghani weaker particularly when the impact of 10 percent duty on all ATT starts impacting Afghan traders transferring ATT goods to Pakistan.

The job is half-done, as experts say that Afghanistan is only one front that has been identified as a route from where dollars are lost by Pakistanis.

There are a number of other avenues that are still operative. Most of the things we import from India are under-invoiced. The amount needed for under-invoicing is still being transferred to Indian traders through some channel.

In the same way, imports from China are highly under-invoiced. The foreign exchange for this purpose is arranged by Pakistani importers from some channels that need to be blocked.

Industry in Pakistan would flourish only if smuggling and under-invoicing is eliminated. It is possible through technology.

The one window regime could effectively check under-invoicing through 24/7 monitoring of export prices of each finished good (mostly finished goods are under-invoiced, many of which can be produced by local industries). In fact, getting rid of all unlawful trade activities would put Pakistan on a sustainable growth path.