Prime Minister Imran, in tweet, has celebrated the trend of surplus in current account of foreign trade and has taken it a as barometer of the movement of economy on the right path. A surplus of $424 million has been recorded in the month of July against the deficit of $ 613 million in the corresponding month of previous fiscal year and a deficit of $100 million in June 2020.
No doubt that the significant increase in current account surplus month-on-month basis shows a reversal of deteriorating situation of external balance. However, the growth of 20 percent in exports has been largely achieved by access of primary commodities to the international market, as the quantum of finished goods in the composition of exports has declined, Moreover, decrease in the import of crude oil, raw material, intermediate goods for exports manufacturing and capital goods for industrialisation is also a contributory factor of current account surplus.
The prices of primary commodities are always fluctuation in the international market, whereas that of finished goods remains stable, if not rising. The four export industries of textile, leather goods, and surgical items and sports products had gained a bit of comparative advantage when government allowed a concessional power tariff of 7.5 cents per unit and gas tariff of 6.5 cents mmbtu during the last quarter of the previous fiscal year. If the period of preferential gas price and regionally competitive power tariff is not extended, the export oriented industries, mostly SMEs, will become noncompetitive and the country will lose its share of market of finished goods not only in this region but in European Union Countries as well.
The attitude of Power Division is hostile towards SMEs, which contributes towards exports in a big way. The top bureaucracy of this division is not taking seriously the directives of the Prime Minister to extend the period of regionally competitive power tariff of 7.5 cents per unit, which is tantamount to deliberately pushing these industries to shut down. Power Division was asked to submit a summary of regionally competitive power tariff to ECC meeting of 21st August, which it, either by design or default, failed to present. The delaying tactics of power division has irked the high ups of Commerce Ministry. Is it lack of coordination between the two ministries that delayed the submission of an important summary to the ECC meeting, which has a direct bearing on the national economy hit hard by the coronavirus pandemic, like the economies of other countries?
Currently, the major items of exports are rice, cotton cloth, cotton yarn, bed wear knitwear, fish preparations, meat and meat preparations. The quantum of value added exports has remained low. Growth in exports on sustainable basis can be achieved only when the composition of exports is tilted towards industrial products of low price and high quality. For this forward movement from the existing second generation technology to fourth and fifth generation technologies is inevitable.
