his year’s floods destroyed standing Kharif crops, including cotton and rice on large areas. Pakistan now faces a challenge of the shortage of wheat as some areas in Sindh and Balochistan are still under flood water and sowing of wheat has not started. This can result in food insecurity in the country.

The Economic Coordination Committee of the federal cabinet on December 5 allowed the import of 950,000 tonnes of wheat, including 450,000 tonnes from Russia at $372 per tonne.

Sindh, which has been a major exporter of rice, has suffered heavy economic losses as most of the rice crop has been washed away by the floods on the right-hand side of the River Indus.

The prices of rice in Sindh and Balochistan have been rising. This will make the rice produced this year too costly for international buyers.

“More than 40 percent of the rice crop has been destroyed in Pakistan,” says a leading exporter, Abdul Rahim. “The political uncertainty and fluctuation in the exchange rate are also making it difficult for Pakistani exporters to compete in the traditional markets.

Pakistan exports rice mostly to China, Malaysia, Kazakhstan, the UAE and Kenya. It exported rice worth $2.15 billion in 2021.

But the problem is not limited to rice exports. Exports of both traditional and non-traditional items from Pakistan, including textile, garments and leather products have also declined.

Pakistan is also facing a foreign exchange crunch and the country’s foreign exchange reserves have been depleting. According to the State Bank, Pakistan’s total liquid foreign reserves stood at $13.38 billion on November 25. The net reserves with the State Bank were $7.5 billion and reserves with the commercial banks stood at $5.88 billion.

The exchange rate once again started climbing in the last week of November apparently due to an increasing demand for the greenback. The government claims that the US dollar is being smuggled to Afghanistan. The central bank has dismissed rumours of a shortage of US currency in Pakistan. The US dollar traded for Rs 224.16 on December 7 and has been steadily rising on a daily basis.

Even though Pakistan has restricted its imports to achieve balance of trade, imports of industrial raw materials have also been affected. The export industry of value-added products, mainly garments and leather use imported raw material for processing their exportable products. Other input costs of industrial manufacturing have also risen due to hikes in the electric power and fuel prices. Even local raw materials are costlier.

According to the Federal Bureau of Statistics, Pakistan’s exports during the first four months of the current fiscal year (July-October) increased slightly to $9,563 million from $9,460 million dollars during the corresponding period last fiscal year, an increase of 1.09 percent. However, exports during the month of October 2022 declined.

The exports in October 2022 were worth $2,384 million as compared to $2,446 million in September, showing a decrease of 2.53 percent. This was a 3.25 percent decline compared to $2,464 million exports in October 2021. Pakistan’s exports have mostly been to traditional markets in European countries and America. The textile and garments sectors have relied on only a few markets, including the United States, China, the European Union, and the United Kingdom.

Even though the government has provided subsidies to five main exporting industries in power rates, they are unable to compete. The five exporting industries: textile (including garments, hosiery, towels), leather, carpets, surgical and sports goods, will get electric power at Rs 19.99 per kWh from October 1, 2022, to June 30, 2023. These five sectors also enjoy zero-rate for taxes.

Exporters are also doing well with non-traditional products and services like fish and fish products and information technology services, including freelancing services for high-tech products and software. The data released by the Ministry of IT and Telecommunication indicated that Pakistan’s self-employed persons received $397.328 million in remittances in the fiscal year 2021-22, compared to $396.243 million received in the previous financial year - a growth of 2.74 percent on a year-on-year basis.

The contribution of the freelancers accounted for 14.77 percent to the total information and communication technologies (ICT) export remittances of $2.616 billion recorded by the country during the fiscal year 2021-22.

The IT is considered a sector with a vast potential for growth. Speaking at the Asia Pacific ICT Alliance Award in Islamabad on December 7, Prime Minister Shahbaz Sharif said that Pakistan had the potential to increase its IT exports to $5 billion from the current around $2.6 billion.

According to the Economic Survey of Pakistan (2020-2021), the compound annual growth rate for IT and related services is 18.85 percent, the highest growth rate of any industry in the South Asia region.

In accordance with the Pakistan Vision 2025 and the Digital Policy of Pakistan 2018, the size of the ICT industry is expected to reach $20 billion by 2025.

But the ICT industry is complaining of many problems, including high input costs. The other difficulties the industry faces include low quality of internet services, a huge educational gap, a lack of intellectual property protection laws and legal framework for e-commerce, a shortage of technology and IT parks, a dearth of research and development opportunities and funding and absence of conducive environment for startups.

According to official figures, in the first four months of the fiscal year 2022-23, IT exports increased by 3 percent, to $854 million. The IT ministry has set a target of $3 billion in exports for the fiscal year.

If last fiscal year’s data is compared, IT exports during July-March (2021-22) increased to $1.948 billion, a growth rate of 29.26 percent over $1.5 billion in the corresponding period of the previous fiscal year. These include telecommunication, computer and information services.

Currently, the industry enjoys a 100 percent tax credit on export income from the IT and IT-enabled services until June 30, 2025, a 100 percent tax credit on profits and gains derived by the IT start-ups for the tax year in which a startup is certified by Pakistan Software Export Board (PSEB). For the next two years, 100 percent equity ownership has been allowed to foreign investors, 100 percent repatriation of capital and dividends, and tax holiday for venture capital funds till 2024.

There are growth-driven financial incentives for the IT and ITeS export remittances. The main purpose of the financial incentive scheme was to encourage the IT and ITeS export remittances through formal banking channels and improve reporting of export remittance receipts in correct IT and ITeS purpose codes, assigned by the State Bank of Pakistan.

The government has allocated Rs 4 billion to the Pakistan Software Export Board (PSEB) for the first ever financial incentive on the IT and ITeS export remittances to be disbursed on the basis of export remittance receipts in the fiscal year 2020-2021.

The author is a senior journalist, currently working as development communication professional in Karachi.