Exports in the time of Covid-19 and Budget 2021

Exports for any country can be seen as a key success while dealing with economic performance. While looking at the export statistics of Pakistan over the past fiscal years of this current government though challenges were there improvement in exports was also seen. In the fiscal year of 2020-21, during July-April, export figures are over US$ 20 billion which were US$ 19.7 billion in the same period during the fiscal year of 2019-20.
Though dealing with pandemic and lockdowns government did focus on improving the overall trade picture. In the initial phase of pandemic, government-imposed lockdown from March 2020 by temporary shutting down of operations in Industrial sector. Alongside this lockdown government for support of industry announced certain packages such as 1) refinance scheme to support employment and prevent the layoff of workers; 2) reduced policy rate; 3) relief package for households, businesses and refinance schemes; 4) ensuring availability and continuity of financial services; 5) promoting digital payments; 6) relief in utility bills; 7) tax reliefs provided by FBR and provincial tax authorities; and 8) information, education and communication related to the pandemic in local languages. Besides these measures, the Government of Pakistan also disbursed PKR 75 billion among industrial workers in the aftermath of Covid-19.
Though with these measures, the government improved the resilience capacity of the industry and help it to grow certain challenges were there for which extra measures should be the priority of the government in the upcoming budget.
According to the recent study concluded by Sustainable Development Policy Institute (SDPI) and Foreign Commonwealth and Development Office (FCDO), the first challenge, the industry is facing in the current scenario is the ability to deliver existing orders which has disrupted the overall demand and supply mechanism. This inability in the international market is primarily due to restrictions imposed by countries amid Covid-19. One of the major restrictions in this regard is the closure of the border followed by trade-related documentation increased due to the pandemic thus increasing the compliance and affecting the business. The impact of this restriction is therefore on the decrease in export orders which has increased the gap between the cost of production and revenues earned by the business.
Second, there is increased difficulty in financing. Industries reported that though policies are thereby State Bank of Pakistan (SBP) but access to finance has been made difficult by banks due to documentation involved thus increasing the compliance cost. This has therefore resulted in meeting the finances and managing the input costs of the primary products firms are engaged in from the start of inception, therefore, increasing the input cost.

Third, a decrease in local orders is another important challenge to be dealt with by industry. This decrease in local orders is due to lockdown imposed in March 2020 and May 2021 by temporary shutting down the business and suspension of transportation. This thus resulted in disruption of logistics and the transportation industry has to suffer along with the industries in the manufacturing sector. The transportation industry’s sufferings are linked to the time of travel which increased during the lockdowns as containers got stranded or did not move. For the manufacturing sector, this loss is in the form of cost of transportation and freight cost as both during a pandemic are on the upward trend. Besides these two costs, firms also have to deal with costs associated with the nature of the product and storage of the product.
To deal with these challenges firms alongside government support packages were to act on their own to be resilient and remain in the market. But this resilience has a very low impact thus dependency shifts on budget and support packages.
In order to enhance the exports though firms are trying to diversify their product ranges, it should be backed by the government through measures which will be announced in the upcoming budget. First and foremost, to ease the documentation there is a need to simplify the procedures for import of commodities necessary and for this purpose allocations should be specified to digital transformation with key roles to be given to the Ministry of Science and Technology. Second, to ease the financial restrictions procedures should be decided by bringing in exporters and SBP on one table. Both exporters and SBP should decide the procedures of finance which should enable access to finance with ease.
Third, to facilitate the losses and improving overall business need is to reduce the number of indirect taxes both on domestic and foreign goods. Similarly, transportation and communication should be backed by warehousing and storage facilities for which a key role is to be played by the Ministry of Communication. This will not only help in reducing the loss for the industry but also will help the transporters while carrying goods. An additional role in this regard should also be given to the Ministry of Science and Technology which through the Pakistan Software Export Board should bring in such a system through which documentation from the point of origin to the destination can be accessed.
Thus, in order to improve the overall exports in the time of Covid-19 with the budget coming around need is to focus on digitalization of the overall system for which roles should be defined for Ministry of Science and Technology in digitalization of system, Finance in terms of easing the financial compliance and dealing with banks and Ministry of Communication for improved warehousing and storage facilities on the roads which it can do along with Ministry of Commerce.