State Bank of Pakistan’s Reza Baqir says Pakistan needs a shift towards export-based economy

KARACHI: Reza Baqir, governor State Bank of Pakistan (SBP), on Monday said the country needs a shift to an export-based economy to achieve high and sustainable growth.

“There is a need to shift from an inward oriented to an outward oriented economy that puts a greater emphasis on exports to achieve high and sustained growth,” Baqir told an audience of a day-long seminar on ‘Firms and Growth’ organized jointly by SBP, the International Growth Center (IGC), the Consortium for Development Policy Research (CDPR) and the Pakistan Business Council (PBC).

The governor said Pakistan’s comparator countries have relied to a larger extent than Pakistan on exports as an engine of growth.

“The top 25 percent of emerging markets and developing countries have grown at an average rate of 7 percent since 2001,” he said. “To reach this average growth rate it was critical for Pakistan to achieve significantly higher export growth.”

Goveror Baqir also discussed two considerations in determining the outlook for exports: exchange rate and export diversification.

“… Addressing exchange rate overvaluation has helped to boost the country’s exports. “

He noted that while the exchange rate had done its part “more fundamental growth in exports needed to come from structural reforms beyond the exchange rate”. Comparing the structure of Pakistan’s exports between 2004 and 2017, governor Baqir noted that Pakistan’s exports had largely remain concentrated in very few sectors.

Furthermore, Pakistan’s exports began to decline starting around 2012. He emphasised on the need to go beyond the traditional commodities of textile and agriculture and the importance of export diversification.

Abdul Hafeez Sheikh, advisor to the prime minister on finance also addressed the seminar and discussed measures being taken by the government to improve the business environment.

Sheikh also emphasised the role of export diversification and that government was committed to work in partnership with the private sector to address the factors which had previously constrained Pakistan’s growth.

Asad Umar, planning minister, spoke about the commitment of the new government to improving job creation and competitiveness, and to put an end to the several policy biases of the government.

He said governments’ protection of uncompetitive sectors over the past many years which remained detrimental to economic growth. The session on ‘Moving from an Inward- to an Outward-looking Economy’ began with introductory remarks by Ijaz Nabi, country director IGC; chairperson CDPR.

Ijaz Nabi stressed the importance of improving the export strategy to ensure sustainable growth, and the role of fiscal responsibility to avoid recurrent external account crises.

After address of eminent speakers, a panel discussion with Ehsan Malik, CEO, PBC, Annabel Gerry, head of DFID Pakistan, and Gonzalo Varela, senior trade economist, World Bank ensued.

Overall, the session highlighted the importance of creating an outward looking economy and the different contours of an export-oriented economic strategy that Pakistan would have to adopt in order to remain competitive in the international market, especially with regards to countries such as India and Bangladesh.