View From Islamabad: Strong export growth lifts confidence in economy

The latest bit of good news for Pakistan's exports has helped to lift confidence surrounding an otherwise beleaguered economic environment.

Estimates from the government's National Statistics Bureau suggest that exports rose more than 19 per cent in July compared to a year ago.

The trend, though still in its initial stages, has overshot the official target of raising exports by 14 per cent this year, in an objective to bring Pakistan's annual trade deficit to $700 million, down from $1.2 billion for the financial year which ended this June.

Pakistan's bold target is driven by relative stability in the exchange rate of the rupee, which has appreciated by almost ten per cent in the past year.

With Pakistan's reserves now at an all time high of $7 billion, up from a couple of hundred million dollars just a few years ago, the rupee is sitting on an important cushion.

But the future trend is set to be determined by three factors.

First, the continuing trends in the world economy do not give much encouragement for spectacular export growth unless a broad global recovery takes place.

While Pakistan has reason to celebrate signs of success, these are nevertheless early signs which need to be pondered over considerably. Pakistan may eventually find itself in the same boat as many other countries, struggling away to beat the odds.

Second, Pakistan's domestic environment - political and economic, is certain to set the pace for future trends.

Though the substantial increase in exports during July is an encouraging sign, the country is bound to go through a bout of uncertainty in the next few months as Pakistan undergoes its election campaign this October.

Already, many businessmen are concerned over fresh political instability, especially if mainstream political parties led by Benazir Bhutto and Shehbaz Sharif decide to confront General Pervez Musharraf.

It's still not clear exactly what would be the shape of Pakistan's next parliament, and where will the balance of power lie. The prospect of deadlock is likely to enhance concerns over future stability.

Finally, Pakistan needs to realistically examine some of the weaknesses left unattended which have undermined its economic prospects in the past.

A country with majority of the population left to be illiterate must ponder over the price that it continues to pay for its many deficiencies.

Across the world, economically vibrant states have not progressed fast in the absence of low literacy levels, poor human resource indicators and a general failure to plan for the long term.
While Pakistan has indeed planned for its future, time and again, such plans have often fallen short of expectations.

The challenge for Pakistan would be to sustain its recent successes as a powerful reminder that the country has indeed seen similar signs of optimism in the past, only to be followed by pessimistic realities.

In the end, keeping up with a strong trend such as export growth would be more vital than marking one success story or another in one month or another.