Urgency of export exploration

On one hand, our external sector displays flashes of promise as remittances continue to climb. On the other hand, the trade deficit is widening, foreign direct investment remains frustratingly elusive, political instability clouds the horizon, and terrorism tests our resilience. If Pakistan is serious about securing its economic future, then one thing is clear: it must revamp the export sector now.

In October 2025, the trade deficit surged about 56 per cent year-on-year to approximately $3.2 billion, as exports dipped and imports shot up. Over the first four months of FY26 (July-October 2025), exports fell roughly 4pc to around $10.45bn, while imports jumped some 15pc to about $23.03bn, leaving a cumulative trade gap of about $12.58bn.

Remittances ($13bn in July-October 2025) continue to offer relief, but they are neither sufficient to fill the trade deficit, nor can they substitute for the deep structural shift our economy requires.

This set of official data points to a significant economic challenge. Specific categories of imports saw dramatic increases during July-September 2025 compared to the same period last year. For example, transport equipment imports exploded by 107pc compared to the same period the years before as per data from the State Bank of Pakistan.

Pakistan’s geographic dependence on select regions makes its exports vulnerable to geopolitics, economic slowdowns, changing trade policies, and demand fluctuations in these markets

This surge is partly attributable to trade liberalisation policies that lowered duties on some goods, but it also reflects Pakistan’s inability to build the manufacturing capacity of its domestic industries.

While exports saw an initial boost in July 2025, the trend reversed, leading to an overall decline of 4pc in July October — despite an increase in textile and apparel sectors (during July-September), as food export earnings crashed by 31.4pc. The government has recognised these challenges.

The commerce minister has emphasised diversifying exports and developing import substitution strategies, particularly for food and energy, under the ‘Make in Pakistan’ initiative. But the overarching goal should be to shift towards export-led growth.

A major structural concern is the over-concentration of Pakistan’s exports in a few markets. Pakistan’s exports are currently directed towards four regions — North America and Europe (US, UK, Germany), East Asia (China) and the Middle East (Saudi Arabia, United Arab Emirates). This geographic dependence makes the export sector highly vulnerable to external shocks such as geopolitics, economic slowdowns, changing trade policies, and demand fluctuations in these markets.

Remittances are a lifeline; they shore up the balance of payments, help households meet their needs, and support the rupee. Yet they are neither predictable nor adequate as the main engine of growth. They hinge on external job markets, immigration policies, and global conditions — none of which Pakistan controls. Worse, they tend to fuel consumption rather than build productive capacity and import-substituting or export-oriented industries.

The expanding trade deficit undermines our economic sovereignty. A nation importing far more than it exports drains foreign exchange reserves, exposes itself to currency instability, escalates inflation pressures, and becomes vulnerable to global shocks. Conversely, exports deliver sustainable foreign exchange, create jobs, and support economic resilience. No country can thrive without a strong export base.

Eric Robertsen, Global Head of Research and Chief Strategist at Standard Chartered, speaking at a media roundtable in Karachi last week, noted that the traditional model of emerging markets (EM) exporting manufactured goods to developed markets (DM) is evolving.

A decade ago, EM-to-DM trade accounted for 40pc of global trade; today, that share has risen to nearly 50pc.

“Take China, for example,” he said. “Despite Chinese exports to the US falling by 30pc over the past 12 months, its overall export figures have remained stable year-on-year. Beijing has offset the decline by expanding trade with other countries, highlighting that the United States and Europe are no longer the sole engines of global growth.”

For Pakistan too, the path forward lies in shifting from low-value to high-value exports and diversifying its export destinations.

What Pakistan needs is a leap: ready-made garments, processed agricultural goods, chemicals, engineering products, and advanced information technology (IT) services. This leap brings innovation, better wages, deeper supply chains, and global competitiveness. It also retains our youth at home by giving them meaningful opportunities rather than pushing them abroad.

There is also the inextricable link between economic strength and national security. Fragile economies breed frustration. Frustration can fuel instability, extremism, and terrorism. Reversing that cycle demands productive opportunities and the dignity of work.

Our textile sector requires urgent technological upgrades, stronger branding, vertical integration, and global market penetration. Simultaneously, agro-processing, pharmaceuticals, engineering goods, and IT services should be prioritised with clear incentives and streamlined regulation.

The country must expand its export markets beyond legacy destinations — towards Africa, Latin America, and Southeast Asia — and deploy trade missions and leverage new trade agreements efficiently to help businesses scale globally.

Policy stability matters equally. A key complaint from exporters is the unpredictability of policy, delayed tax refunds, financing bottlenecks, and cumbersome regulation. The Export Financing Scheme must be accessible; bureaucratic obstacles must be removed; export-supporting infrastructure must be reliable. Without an environment of predictability, investors will remain on the sidelines.

Published in Brackly News, The Business and Finance Weekly, November 17th, 2025