Relief for export sector

2026-01-31 - 20:16

IN the face of declining exports, Prime Minister Shahbaz Sharif, on Friday, announced a major relief package for industries and export sectors, which will, hopefully, improve competitiveness of our products in the international market. The incentives include a reduction in electricity tariffs by Rs4.04 per unit and wheeling charges to less than Rs9 for industry, alongside a significant decrease in the export refinance scheme rate from current 7.5 percent to 4.5 percent and the issuance of blue passports for the leading exporters for two years. He said the government had allocated Rs1,052 billion for the export refinance scheme, of which Rs900 billion had already been utilized, adding that under the scheme, exporters were availing three percent relief on the State Bank of Pakistan’s policy rate, which had now been further reduced to 4.5 percent. The measures already announced and those being contemplated by the Government might stimulate growth and create surplus for exports. There is no denying the fact that Pakistan’s economic revival and long-term stability depend on export-led growth and foreign direct investment (FDI) in export-oriented projects. However, it is also argued that FDI is not necessarily the panacea of our economic woes as investors normally take out of the country their profit and earnings in the shape of foreign exchange, putting pressure on scarce reserves. In this backdrop, the announcement of the Prime Minister that in future FDI would be encouraged only in export-led projects, which would help generate foreign exchange and strengthen the country’s reserves. Pakistan’s foreign exchange reserves are presently at a comfortable level but these also include loans obtained from friendly countries like China, Saudi Arabia, United Arab Emirates (UAE) and Qatar. Building reserves through loans might be a temporary solution to the immediate financial difficulties of the country but not a viable solution to the problem. There are also serious concerns that the hard earned foreign exchange is used to finance reckless imports and this policy needs to be reviewed as well. It is a reality that Pakistan’s historic victory against India in the short May War last year and the principled-based diplomatic offensive have opened opportunities for greater economic interaction with other countries. The Prime Minister has rightly pointed out that after the ‘Marka-e-Haq’, heads of various countries who previously hesitated to greet us now come forward to embrace us. Our influence has been established globally to such an extent that our words are now heeded and investment initiatives are being pursued. Apart from hefty defence production deals with several countries, there are also moves aimed at attracting investment in different sectors of the national economy, especially mining and natural resources but it is understood such understandings take time to materialize. There are serious challenges that need priority attention. The PM himself has acknowledged that poverty and unemployment had increased and exports had not met the set targets. The unemployment issue, coupled with limited economic activity, would have caused social unrest but the increased manpower export offered solace to people, especially skilled workers and qualified youth. It is, therefore, high time that the government focuses on industrialization in letter and spirit as this will not only create employment opportunities but also surplus for export. No doubt, the interest rate was still high but the measures announced by the Prime Minister have the potential to stir economic activity as both the rates of electricity and the export refinance scheme have been brought down significantly. Under the special relief package, electricity tariffs for industries have been reduced by Rs4.04 per unit and the financial burden on industrial electricity bills, which was Rs8.90 per unit at the beginning of the government, has now been reduced to zero. The business community has also been complaining about higher taxation and this issue also needs to be looked into seriously.