Export Instability and Economic Growth in Pakistan

Abstract

Pakistan's economy is typically characterized by a large resource (saving-investment) gap, government budget deficit and current account imbalance. Reliance on international trade and foreign capital inflows has become crucial to sustain and enhance the pace of economic growth in the scarcity and misutilization of domestic resources. The changing composition of exports suggests that Pakistan is no longer a country that relies heavily on the export of primary commodities to generate foreign exchange earmings. However, Pakistan still relies heavily on the labour-intensive and low value-added exports. This study is an attempt to determine growth and instability in Pakistan exports value by economic classification using time-series data for the period 1973-74 to 2000-2001. The study also shows the association between growth and instability in exports. The period has been divided into two sub-periods, namely, period I (1973-74 to 1986-87) and period II (1987-88 to 2000-2001) to clearly bring out the trend in more recent period. The study reveals that during period III (overall period), the growth rate of manufactured goods was highest, followed by semi-manufactured and primary commodities. The export instability is higher for semi-manufactured and primary commodities compared to manufactured goods in period III. Instability in most of the sections increased in period II as compared to period I. The study also confirms that there exists a statistically significant and positive association between export growth and export instability in Pakistan.