By Jawad Ahmed ISLAMABAD, May 11 (INP-WealthPK): Pakistan's growing import bill and depleting foreign reserves are posing stiff challenge to the economy, and the incumbent government will have to work tirelessly and prudently to bring the economy back on track. Salim Raza, a renowned economist and former governor of the State Bank of Pakistan (SBP), discussed the challenges facing Pakistan at a webinar hosted by Pakistan Institute of Development Economics (PIDE), Islamabad. “Our capacity of production cannot keep up with the 5% increase in demand. With the current investment level and economic structure, economic growth of more than 3-4% puts pressure on the Pakistani rupee by depleting foreign reserves, and the government had to get support from the International Monetary Fund (IMF) for maintaining its foreign reserves and arrange import payments,” he said. Pakistan’s economy enjoyed a strong recovery and grew 5.6% in FY21 after a recovery from the Covid-19 pandemic. Salim Raza said that rising import demand and dwindling foreign reserves require the government to seek IMF support to keep its balance of payments under check. “We have been in the IMF programs multiple times; Pakistan has borrowed money from the IMF 13 times in the last 34 years. Each of the IMF program asked the government to do the same things to increase tax net and implement structural reforms,” he pointed out. While highlighting the reason behind requesting the IMF assistance, Salim Raza stated that as an agriculture-based economy, Pakistan spends billions of dollars every year on agricultural and food imports. “Unfortunately, this industry has been neglected. This problem has to be addressed by developing a sustainable export policy and supportive incentives,” he said. The rising food import bill is one of the areas of concern for the government. According to the SBP, in the previous fiscal year, the country spent over $7.2 billion on food imports. Pakistan imported $6.30 billion worth of food items in the first nine months of the current fiscal year, compared to $5.34 billion in the corresponding period of the previous fiscal year. The food import bill is projected to rise in the coming months as the government plans to import wheat and sugar to address a shortfall in the country. According to Salim Raza, Pakistan’s entire export product portfolio consists of heavy import components or low-cost items. Most importantly, he said, Pakistan must shift from raw materials to intermediate goods in its export products. Synthetics such as polyester, viscose, and rayon account for 70% of the worldwide textile export market, whereas cotton accounts for just 30%. In Pakistan, however, the situation is reversed, he added. “China is the world's largest manufacturer of synthetics. Under the China-Pakistan Economic Corridor and special economic zones, Pakistan should establish a special enterprise zone for textiles and welcome Chinese businesses to invest in synthetics to enhance textile exports,” he suggested. The former SBP governor said that in order to establish a long-term export strategy that leads to incremental growth, the country must first address the issue of imported intermediate products and raw materials. He said the government must support small and medium enterprises in order to reduce reliance on raw material imports. He appreciated the initiatives to promote digitalization, which has the potential to bring millions of dollars through exports. “During the current fiscal year, it is predicted that IT exports would exceed $1.75 billion,” he pointed out. “India is one of the most important markets for IT exports; if Pakistan can achieve 10% of India's IT exports in the next five years, we will be able to overcome our financial difficulties,” he added.