Muneeb ur Rehman

Pakistan can potentially benefit from China's growth model, which is predominantly fueled by exports, to overcome difficulties in its external sector, such as burgeoning current account deficit, a high debt-to-GDP ratio and declining foreign exchange reserves. Speaking to WealthPK, Mahmood Khalid, Executive Director at CPEC Centre of Excellence, Islamabad, said that Pakistan's consumption-driven growth model was not sustainable since it had failed to meet the country's external financing requirements. “Pakistan should prioritise attaining a high growth rate based on exports.” According to the World Bank data, China's exports in FY22 stood at $3.71 trillion, while its gross domestic product was approximately $17.96 trillion. Khalid added that China had successfully enhanced its exports by focusing on value-added goods and advancing towards the production of high-value sophisticated products.

“In contrast, Pakistan faces challenges in manufacturing value-added products and fostering innovation.” He expressed his disappointment over the fact that the share of exports in Pakistan's total GDP was just over 9%. According to the most recent economic survey, exports declined 9.9% during the July-March period of FY23, amounting to $21 billion compared to $23.3 billion in the corresponding period of the previous year. While discussing the obstacles to export-led growth in Pakistan, he pointed out that the country's export basket lacked diversification and heavily relied on textile goods. “An overreliance on products with a low value in global markets leads to a decline in the overall value of exports.” Mahmood Khalid suggested Pakistan should pursue a gradual diversification of its export base, moving beyond traditional sectors such as textiles and agriculture.

“Pakistan can explore opportunities in sectors like technology, manufacturing and services in order to broaden its export portfolio and focus on higher-value products.” He expressed optimism over the setting up of Special Economic Zones (SEZs) under CPEC, drawing parallels to how these zones initially aided China in promoting exports. An exports-led growth model can effectively tackle Pakistan’s perennial current account deficit. By expanding its export base and enhancing trade performance, Pakistan can generate foreign exchange earnings that can be utilised to address the deficit, decrease reliance on external borrowing, and strengthen fiscal stability.

Credit: INP-WealthPk