This week, The News on Sunday, speaks to Dr Kaiser Bengali, a senior economist with over 40 years of experience in teaching, research and policy, about Pakistan’s reliance on imports and how this impacts an ailing economy, and what can be done to decrease import reliance in industries.

Dr Bengali has a master’s in economics from Boston University, and a PhD in economics from the University of Karachi. He has taught and conducted research at prestigious institutions in Pakistan, including the Applied Economics Research Centre (AERC), University of Karachi, the Sustainable Development Policy Institute (SDPI) and the Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST).

His areas of research include issues in planning and development, macro-economic and fiscal policies, poverty, unemployment and social justice, urban and regional planning, decentralisation and local government and finance, education, and ethnic, sectarian and religious militancy and violence. Till recently, he was the head of the Chief Minister’s Policy Reform Unit, Government of Balochistan. Earlier, he was an advisor for planning and development to Sindh chief minister. He was also the first head of the Benazir Income Support Programme, having had also designed the programme.

Excerpts of the interview follow:

The News on Sunday (TNS): What are the causes for increase in Pakistan’s trade deficit?

Dr Kaiser Bengali (KB): There are two factors in trade and payments deficits. One, imports are growing faster than exports; growth in the latter being almost stagnant. The other is the nature of foreign direct investment (FDI), which is almost entirely in the service sector (as opposed to the manufacturing sector). The result is that these companies earn their revenues in rupees and remit their profits in dollars – i.e., there are no inflows of dollars, only outflows.

TNS: Is there a need to cut down imports? If so, how can this be achieved?

KB: The reason exports are stagnant is because, over the last four decades, macroeconomic policy has undermined the manufacturing sector, and over the last 2 decades there has been an explicit bias towards turning Pakistan into a trading economy – trading in imported goods.

TNS: Is import substitution a solution? How can import growth be reduced?

KB: Imports are high and surging because the energy, transport and manufacturing sectors have become imports input-oriented. Power is generated with imported furnace oil (now reduced), LNG and coal. Goods transportation is 95 percent by trucks, which run on diesel. Even our largest manufacturing sector – textiles – is dependent on imported machinery, parts and cotton.

Expanding exports can be a medium-term objective, subject to prioritising manufacturing over services sector. Import growth can be reduced by:

Prioritising local fuels – coal – and solar in power generation

Shifting goods transportation from road to rail, which uses one-third less fuel per kilometre-tonne

Promoting industries based on local raw materials

Compulsory allocation of acreage to cultivation of wheat, pulses and oilseeds (sunflower) to achieve self-sufficiency and eliminate imports

Banning import of all non-essential consumer goods

Further, all free trade agreements (FTAs) have resulted in an increase in our imports without a similar increase in exports. Such agreements should be cancelled, suspended or not renewed. Also, all FDI in manufacturing sector should be subject to exporting at least 50 percent of their output.

TNS: Was the increase in prices of petroleum products inevitable in Pakistan? What impact(s) will it have?

KB: Petroleum prices will have to rise if international prices rise. This will lead to supply side inflation, which can be mitigated by reducing non-development expenditure, including non-combat defence expenditure that will reduce the pressure on prices on the demand side.

The interviewer is a staff reporter. He can be reached at shahzada.irfan@gmail.com