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Effects of low oil prices

Effects of low oil prices

According to newspaper reports, the country will not be able to achieve the annual growth target of 5.5 percent this year mainly because of decline in cotton exports. The international financial institutions have already projected the growth in the gross domestic product at around 4.5 percent despite the fact that oil prices have recorded a significant decline this fiscal year. The Pakistani economy often remained under pressure due to rising prices of oil and gas in the international market and has suffered energy crisis for years. However, at a time the low oil prices have brought boon for many emerging economies, Pakistan is feeling the heat of boon and bane at the same time for the same reasons. As a matter of fact, oil import is a major source of income for the government and low oil prices mean low income in the form of duties and taxes. The low oil prices have also begun to slash the income of the oil producing countries. As most of the expatriate Pakistanis are working in the Middle Eastern countries, it will definitely affect the volume of remittances they send to the country.

The federal commerce minister has recently unfurled the salient features of the new trade policy, saying the policy will mainly focus on the provision of maximum incentives to the export sector and stressed the need for using modern technology in the value addition to make the Pakistani exports competitive in the international market. The government has allocated Rs 6 billion to encourage exports and introduce Pakistani brands in the international market. The government has already decided to introduce zero-rating regime for exports from the next financial year. According to an assessment, Pakistan’s exports to European countries have increased by 33 percent after securing GSP Plus status. However, a 20 percent decline in euro’s value against US dollar have neutralized the monetary gains while the global recession has slowed down the demand of exportable products from Pakistan.

According to experts, Pakistan is at a better place as compared to the countries in the region and has the potential to become hub of international trade and investment. What only needs to do is to streamline the banking system, improve electricity supply and flush out terrorism once for all. However, alongside making arrangement for energy generation, the country needs political stability, financial management and a meticulous foreign policy. The country needs to be rid of the economy of loans and focus should be on local and foreign investment to establish a strong industrial base. More importantly, the country must be pulled out of the state of war.