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Special Edition-07.pdf - Lahore School of Economics

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134<br />

M. Ashraf Janjua<br />

Like other economies, the September 11, 2001, incident had<br />

significant consequences for the Pakistani economy. The process <strong>of</strong><br />

appreciation <strong>of</strong> Rupee-Dollar parity not only started but quickened primarily<br />

during the month <strong>of</strong> October 2001 in the wake <strong>of</strong> increasing capital inflows<br />

from the international community and donor agencies and easing <strong>of</strong> quota<br />

restrictions imposed on some Pakistani exportables to the Euro zone and the<br />

United States. The strengthening <strong>of</strong> the Rupee resulted from a variety <strong>of</strong><br />

factors, these included the lifting <strong>of</strong> US sanctions, easing <strong>of</strong> quota<br />

restrictions by the European community, rescheduling <strong>of</strong> external debt, a<br />

positive response by the IMF in terms <strong>of</strong> approval <strong>of</strong> credit lines, an increase<br />

in foreign exchange reserves and diversion <strong>of</strong> investment funds from the<br />

currency market to the stock market.<br />

Pakistan's Exports and Rupee App/Dep<br />

Million US$<br />

20,000<br />

18,000<br />

16,000<br />

14,000<br />

12,000<br />

10,000<br />

8,000<br />

6,000<br />

4,000<br />

2,000<br />

0<br />

FY79<br />

FY81<br />

FY83<br />

FY85<br />

FY87<br />

FY89<br />

FY91<br />

App/Dep<br />

FY93<br />

FY95<br />

FY97<br />

FY99<br />

Exports<br />

FY01<br />

FY03<br />

FY05<br />

FY07t<br />

10<br />

5<br />

0<br />

-5<br />

-10<br />

-15<br />

-20<br />

In Percent<br />

As regards Pakistan’s exports, it may be noted that Pakistan’s export<br />

structure has a very narrow base, both in terms <strong>of</strong> products and markets,<br />

and most <strong>of</strong> the exportable items are <strong>of</strong> low value addition. The composition<br />

<strong>of</strong> exports mainly consists <strong>of</strong> textile manufactures and food items, largely<br />

originating from the agricultural sector where the incidence <strong>of</strong> uncertainty<br />

is quite high and the market is highly competitive. Although, the textile<br />

sector constitutes over 65% <strong>of</strong> our total exports, its production and exports<br />

have attained almost maximum capacity and there is a need to shift the<br />

focus to other exportable items. The external shocks taking the form <strong>of</strong><br />

depressed demand and decreasing price <strong>of</strong> export products in the<br />

international market have made the external sector most vulnerable. As for<br />

the destination <strong>of</strong> Pakistan’s exports, about 70% <strong>of</strong> exports are directed to

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