High energy costs, falling farm yields squeeze exporters as industry warns rupee stability cannot be sustained
LAHORE:
Prime Minister Shehbaz Sharif is worried over declining exports and has directed the government to engage the business community for a turnaround, Federal Minister for National Food Security and Research Rana Tanveer Hussain said on Friday at the Lahore Chamber of Commerce & Industry (LCCI).
According to an official statement issued on Friday, Hussain said Pakistan’s exports have declined by 36% to 38%. He cited high production costs, expensive energy and a complicated tax system as problems for exporters. He added that the prime minister was in close contact with the business community and had formed working groups, led by business representatives, to include ground realities in policy-making.
LCCI President Faheemur Rehman Saigol warned that if the decline continues, it will not be possible to keep the rupee stable and depreciation would raise inflation and industrial costs.
He said food exports fell to $1.95 billion from July to November, compared to $3.15 billion in the same period last year, a 38% decline, while rice exports dropped to $769 million from $1.5 billion.
Saigol said the main reasons for the decline in agricultural exports included low per-acre yields, weak investment in research and development, smuggling, hoarding and inconsistent policies. He said per-acre yields of wheat, rice and cotton have declined over the last two years.
He said Pakistan is a textile-based economy, with about 60% of exports linked to textiles, but declining cotton production and quality were hurting value addition.
Saigol described high electricity and energy prices as a threat to export competitiveness and demanded the removal of the infrastructure cess imposed by the Sindh government. He said exporters have paid around $9.15 billion under this cess, but there is no transparent audit of how the money has been used.
He said removing exporters from the Final Tax Regime, delays in refunds and high production costs have affected industrial activity. He added that Pakistan spends about $6 billion on food imports, which he described as a food security risk, and welcomed Bangladesh’s approval to import 50,000 metric tonnes of rice from Pakistan.
