A Bloomberg Story.
Pakistan’s government is targeting a 10 percent jump in exports this financial year after giving tax breaks to businesses, in a bid to reverse a three year slump and ease its widening trade and current account deficits.
Imports will also drop as much as $2 billion after additional levies were imposed on more than 700 “luxury” goods, including cars and nail polish this month, Mohammad Younus Dagha, secretary at the Commerce Ministry, said in an interview. Pakistan also announced a package of 180 billion rupees ($1.7 billion) in February that gives tax breaks to exporters and incentives for them to enter new markets.
The new incentives may make Pakistani goods more competitive to the Chinese, who are the largest investors and contributors to Pakistan’s trade deficit. As China finances more than $55 billion of infrastructure projects across Pakistan as part of its Belt and Road trade route initiative, the South Asian nation’s import bill has increased and foreign reserves have dwindled before elections next year as it brings in more machinery and goods. That’s combined with a drop in its exports in the last financial year to the lowest in seven.
“We are now in a phase every developing country has to pass when you have to suddenly import a lot of machinery, equipment for your growing economy,’’ Dagha said. “This is the period we have to negotiate in a way that it doesn’t hurt the economy as far as the external sector is concerned.’’ The nation’s cement, steel, electronics and automobile industries are expanding as interest rates have been held at their lowest in more than four decades. Fertilizer and sugar companies are also producing a surplus that will be exported this year, according to Dagha.
“Without branding it’s difficult to sell your product,’’ he said after greeting U.S. Consul General Grace Shelton at the event which included a fashion show, fireworks and a video showing the China-operated port at Gwadar.