Saturday January 22, 2022

Reality bites!

January 03, 2021

LAHORE: Pakistan remained lucky during the global recession, as high demand for the low value-added textiles resulted in a surge of 18 percent in exports, but our trade managers should remain realistic because this short-lived windfall would not last long.

In lockdown and social distancing culture that is currently prevalent worldwide, people stay at home most of the time and wear casual dresses.

Branded apparel is mostly used by white-collar employees in functions, social gatherings, or offices. In the same way, people spending most of the time at home tend to buy more bed-sheets and towels. Pakistan produces these items at competitive rates even during normal times.

We must realise that lockdowns and social distancing would not last forever.

Soon the easing up would accelerate and demand fashion textiles to surge and diminish the low-value textiles. We must take the present opportunity to plan high-tech value-added garments. We can start providing samples to our buyers of low textiles and get their feedback.

Our textile exports would remain limited without high value-added textiles. We should stop waiting for God-send opportunities to boost our exports or economy. There is a need to build a sound base in every sector of the economy to market our products abroad.

We have left our economy at the mercy of global forces. Pakistanis used to consume foreign exchange worth around $500 million annually on travel.

Now that the foreign travel has almost stopped, we are saving that much foreign exchange monthly, while jubilating that we have

narrowed the current account deficit.

There was no Hajj this year that saved at least $1 billion in foreign exchange. We got a moratorium on our bilateral debt because Covid-19 has also saved debt service of at least $500 million.

These are all temporary measures. When things return to normal, we will have to bear with the drain on foreign exchange because of the routine foreign travel, Hajj, and debt servicing.

The current account deficit would go negative once pre-Covid-19 activities start.

Our planners should start preparing for harder days when the global economy returns to normal.

Remittances have been the saving grace for the rulers, but the question is how long these remittances sustain the current level.

A decline in remittances to the pre-Covid-19 level would be a big blow to our foreign exchange reserves.

We are attracting dollar accounts at higher than global rates, but we have an unlimited appetite for foreign exchange. Once markup deposit reaches higher levels, they would haunt our economic managers, as paying markup would become unviable.

This practice of attracting foreign exchange from overseas Pakistanis is similar to the National Saving Instrument.

We have reached a stage where we take NSS deposits to service past loans.

Servicing NSS deposits in Pakistani currency is easier, but servicing foreign deposit loans would become an uphill task in a year or two. Our rulers are playing in the gallery.

They have not yet introduced the much-needed transparent reforms. They are expecting miracles to sail them through difficult times. They are dolling out more money than they could generate.

They are also allowing profiteers to fleece the consumers by remaining silent spectators to frequent price hikes.

The opportunity provided to us by the Covid-19 is being wasted in public appeasing non-productive programmes. Shelter houses, free meals should be left to the philanthropists.

The government has to concentrate on governance. By improving governance, the miseries of the people could be alleviated.

We need policy reforms where a police officer dare not to provide possession of land from the

genuine owner to the relative of an influential person in the government.

We do not need an engineered rosy picture of the economy. We are accumulating debt for consumption and claim that a turnaround in the economy has been achieved. Power sector reforms cannot wait.

We are losing money in this sector with every passing section (not day or month).

Purging corruption from the power sector should be the top priority of the government instead of dedicating witch-hunting of its rivals.