Special Edition-07.pdf - Lahore School of Economics

134
M. Ashraf Janjua
Like other economies, the September 11, 2001, incident had
significant consequences for the Pakistani economy. The process of
appreciation of Rupee-Dollar parity not only started but quickened primarily
during the month of October 2001 in the wake of increasing capital inflows
from the international community and donor agencies and easing of quota
restrictions imposed on some Pakistani exportables to the Euro zone and the
United States. The strengthening of the Rupee resulted from a variety of
factors, these included the lifting of US sanctions, easing of quota
restrictions by the European community, rescheduling of external debt, a
positive response by the IMF in terms of approval of credit lines, an increase
in foreign exchange reserves and diversion of investment funds from the
currency market to the stock market.
Pakistan's Exports and Rupee App/Dep
Million US$
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
FY79
FY81
FY83
FY85
FY87
FY89
FY91
App/Dep
FY93
FY95
FY97
FY99
Exports
FY01
FY03
FY05
FY07t
10
5
0
-5
-10
-15
-20
In Percent
As regards Pakistan’s exports, it may be noted that Pakistan’s export
structure has a very narrow base, both in terms of products and markets,
and most of the exportable items are of low value addition. The composition
of exports mainly consists of textile manufactures and food items, largely
originating from the agricultural sector where the incidence of uncertainty
is quite high and the market is highly competitive. Although, the textile
sector constitutes over 65% of our total exports, its production and exports
have attained almost maximum capacity and there is a need to shift the
focus to other exportable items. The external shocks taking the form of
depressed demand and decreasing price of export products in the
international market have made the external sector most vulnerable. As for
the destination of Pakistan’s exports, about 70% of exports are directed to