Pakistan's Export Dynamics: Insights into Declining US Exports and Growing Trade with China
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- Published: Tuesday, 09 April 2024 03:04
Pakistan’s export landscape has witnessed significant shifts in recent years, with notable declines in exports to the United States juxtaposed against a substantial increase in trade with China. According to data compiled by the State Bank of Pakistan, merchandise exports to the US experienced a notable decline of 10.14 per cent, totaling $3.63 billion in the first eight months of the current fiscal year, compared to $4.04 billion over the corresponding period last year. This decline is primarily attributed to a dip in exports of textiles and clothing to North America.
Contrary to the decline in exports to the US, Pakistan's trade relations with China have been burgeoning. Exports to China surged by a remarkable 42 per cent, reaching $1.895 billion in July-February FY24 from $1.334 billion over the same period last year. Forecasts suggest that exports to China are poised to reach $3 billion by the end of June this year, marking a substantial growth trajectory.
The shift in trade dynamics is further highlighted by the Pakistan Bureau of Statistics (PBS) data, indicating that exports to the US stood at $5.17 billion in FY23, witnessing a significant decline of 23.28 per cent from $6.74 billion over the previous fiscal year. Meanwhile, exports to China in FY24 amounted to $2.22 billion, reflecting a decline of 30 per cent from $3.18 billion in FY22.
In FY23, the US remained Pakistan’s largest export destination, albeit with a moderate decrease in shipments, comprising 19 per cent of Pakistan’s overall exports, down from 21 per cent the previous year. Conversely, the share of exports to China declined from 10 per cent to 8 per cent during the same period. Despite this, exports to the United Kingdom, the Netherlands, Germany, Spain, and the United Arab Emirates remained relatively stable, collectively accounting for 55 per cent of Pakistan’s total exports in FY23.
Several factors contribute to the decline in exports, including a shortage of capital, which impedes businesses' ability to invest in export operations. Moreover, issues with refunds, such as delays in receiving sales tax refunds, deferred sales tax payments, and income tax refunds, exacerbate the challenges faced by exporters.
The decline in imports from the US further underscores the evolving trade dynamics. Imports from the US dropped by 17.36 per cent to $1.19 billion during July-February, compared to $1.44 billion a year ago. Similarly, in FY23, imports from the US witnessed a substantial decline of 45.64 per cent, amounting to $2.18 billion compared to $4.02 billion in the same months of the previous year.
The changing trade patterns between Pakistan, the US, and China reflect evolving global economic dynamics and geopolitical considerations. While challenges persist, such as capital shortages and issues with refunds, Pakistan is navigating these shifts by capitalizing on emerging trade opportunities, particularly with China, while seeking to address and mitigate the underlying impediments to export growth.