(MENAFN- Khaleej Times) As several key business indicators are down yet another bad news comes and it may hit the very survival of the government itself: despite tall claims the exports are down for the third year running.
The exports in the just ended FY-15 totalled only $24.2 billion - against the government-set target of $27 billion for FY-15, which ended on June 30 was the third consecutive year of the present government when exports fell down the target. Exports were down 3.5 per cent as against the actual amount of $25.1 billion achieved in FY-14. Similarly, actual exports in FY-14 were only $25.1 billion as against the targeted $29.9 billion. The business is moving in a constant reverse gear. Why?
Surprise of all surprises, it happens at a time when pro-business Prime Minister Nawaz Sharif is holding the fort, belying all popular hopes of a big business revival, industry to move faster and to provide more jobs the millions of the growing number of the unemployed.
The government is so desperate to fill the growing budgetary gap that it is levying additional taxes or continuing them at still higher rate both on exports and imports.
The declining prices of imported oil and commodities, which should have led to large domestic production and help Pakistan compete internationally with lower export prices, did not work.
In the same vain, the government refused to listen to the persistent demands from five key productive and export sectors, headed by textiles, to ease their burden rather than loading it further with additional burden.
The biggest industry and the largest forex earner of the country through exports, All Pakistan Textile Mills Association (Aptma) is on a warpath against the government. Over the weekend, it held out a threat to go on strike as the government refused to listen to their voices. Aptma chairman S.M. Muneer also demanded the government "to cut the high cost of doing business that has led to a shut-down of more than one-third of the installed capacity of the textile industry." He said: "Textile producers and exporters are forced to pay new, and innovative taxes of over 12 per cent, collectively amounting to $1.2 billion of their turnover in different forms. It has eroded the economic viability and international competitiveness of our industry. The government has cornered the industry, further, by slapping five per cent sales tax on non-registered buyers of yarn and fabric in the new budget for FY-16."
The tax-collection spree by the federal government in Islamabad and even the provinces is hitting whatever comes into sight. Take the case of imposition of a five per cent tax on fees sent abroad the students' education institutions. Banks have been told to remit up to $70,000 or equivalent in other currencies per year per student. Students will also be allowed to receive up to $5,000 to meet their initial living expenses. The SBP has also allowed banks to remit up to $50,000 or equivalent in other currencies to foreign hospitals on account of initial treatment of resident Pakistanis on the recommendation of the concerned medical specialist or hospitals in Pakistan. Now the question is that alongside the tax burden on individuals, will people start using unofficial and comparatively cheaper and faster, channels to remit and receive hard currencies? Where will it end up?
Foreign exchange reserves
The government's dollar borrowing spree is on while its own export earnings are low and stagnant. But the nation's saving grace - the overseas Pakistanis working in the UAE, Saudi Arabia, US and UK are sending historically biggest amounts of cash back home.
The home remittances haves raised, over the weekend, the forex reserves to an all-time high of $18.2 billion. The central bank said the amount includes $13.08 billion owned by SBP, while the commercial banks' own the rest. "At this level, the reserves are adequate for five months of import cover," spokesman of the SBP said.
The IMF, this week also released $506 million for Pakistan, which has brought the total loan availability, out of the Extended Fund Facility (EFF) loan of $6.4 billion, to $4.05 billion, so for. Deputy Managing Director Mitsuhiro Furusawa, announcing the release said: "Pakistan foreign exchange reserves have continued to increase and monetary policy remains appropriate under current microeconomic conditions."
The IMF, however, also noted "private investment, including FDI and exports, are still much below the desired level." Electricity outages continue to be an important restraining factor for competitiveness and growth. In addition, the appreciation of the Rupee in real effective terms has been eroding Pakistan's competitiveness," the IMF noted.
That sums up the export situation and what the government should to full industry's demands which are almost endorsed by the IMF.
Views expressed by the author are his own and do not reflect the newspaper's policy.
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