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Rising trade deficit

Rising trade deficit

The prices of commodities are on downward trajectory all over the world but Pakistan faced trade deficit of $23.96 billion during fiscal year 2015-16 from $22.15 billion in the preceding fiscal year. The business community has already expressed concern over the burgeoning trade deficit, asking the government to take stakeholders into confidence and remove the causes, hindering exports and pressuring the domestic industry. The prime minister has recently announced an export package which will support various sectors, including the largest export revenue generator of the country, the textile sector. However, economists fear the trade statistics are not promising and the country’s trade deficit could further increase if immediate steps are not taken. It is a good omen that the government has announced support package for vital industries, including the textile sector, but implementation of the package is the real job to do in the current scenario. Despite achieving the GSP plus status in 2014, the textile sector has been facing the worst possible scenario as textile exports could not be enhanced at satisfactory level. The duty free excess to European Union means the country has free hand to capture the market but the higher cost of doing business and different tax issues are making the Pakistani products uncompetitive.

The textile sector is the backbone of the country’s economy and the largest manufacturing sector but it has failed to reap benefits of the GSP Plus status. In the meantime, Bangladesh managed to push its exports to $31.2 billion in 2014-15, of which textile sector accounted for almost $25 billion. However, Pakistani exports dropped to $12.14 billion in 2015-16 after touching $13.8 billion worth of exports in 2013-14. It shows how the largest sector of the country is performing in comparison with other countries in the region. According to experts, the government will have to cut import tariffs to pave the way for availability of raw material for the local industry. The lower duties on important raw material will cut the cost of production and make the value-added goods competitive in the international market. The policymakers also need to study the Bangladesh model which has achieved laurels in the export sector. A tiny economy is showing better performance than Pakistan and this only made possible through prudent policies.

The complex system of taxation also needs to be reformed as only better tax collection is not the criteria of good economy. There is a need to bring many untaxed sectors and individuals into the net as people should not be allowed to avail growth opportunities free of cost.