Key points
- Pakistan’s weak exports keep growth consumption-driven, triggering recurring boom-bust cycles
- Export share fell from 16% of GDP in the 1990s to nearly 0% in 2024
- High tariffs, costly energy, and poor logistics cause a $60 billion export gap
ISLAMABAD: The World Bank has warned that Pakistan’s chronic export stagnation continues to trap the economy in a recurring cycle of boom and bust — a pattern the government says it is determined to end through a long-term shift toward export-led growth.
In its latest Pakistan Development Update, titled “Staying the Course for Growth and Jobs,” the Bank said that despite improved macroeconomic stability and declining inflation, Pakistan’s growth model remains fragile, overly reliant on consumption, and vulnerable to external shocks.
“Weak exports have left Pakistan’s growth reliant on consumption, fueling repeated boom-bust cycles,” the report said.
“Exports have declined from 16 per cent of GDP in the 1990s to just around 10 per cent in 2024, with the export basket still concentrated in low-value textile and agricultural products. Economic upturns have been fueled instead by debt- and remittance-financed consumption, rather than export dynamism.
As growth accelerates and is fueled by higher imports, foreign exchange reserves are strained, particularly when the exchange rate is tightly managed, triggering recurrent balance-of-payments crises.”
The Bank said this pattern has “undermined investor confidence, constrained private investment, and eroded the foundations of long-term sustainable growth.”
At a recent briefing, Finance Minister Muhammad Aurangzeb reaffirmed, in contrast, that the government’s economic policy aims precisely to break that cycle.
“We are moving away from consumption-driven spurts that repeatedly lead to external stress,” he said. “Our focus is on productivity, competitiveness, and export-led growth. Without expanding our export base, sustainable development will remain elusive.”
Aurangzeb has repeatedly underscored reforms in tariff rationalisation, tax simplification, and energy pricing to make industries more competitive. He has also highlighted efforts to promote value-added manufacturing, information technology services, and agro-based exports. However, the exact timeline for a new Export Development Policy has not been publicly specified.
The World Bank identified multiple obstacles constraining Pakistan’s exporters, including high tariffs, costly energy, cumbersome regulations, and logistical inefficiencies.
It estimates that Pakistan’s exports underperform by almost US $60 billion annually compared to their potential. The report also warned that the country’s product mix remains “narrow and undiversified,” making it highly susceptible to shifts in global demand and commodity prices.
While the Bank welcomed the National Tariff Policy, which aims to reduce the simple average tariff from 20.2 per cent to 9.7 per cent by 2030, it cautioned that tariff cuts alone will not deliver results unless accompanied by deeper reforms in trade facilitation, financial access, and logistics infrastructure.
The report further observed that digital exports — such as IT and business process outsourcing services — have grown but still account for only 0.1 per cent of the global digital services market, compared to India’s 5.8 per cent. Poor broadband penetration, regulatory hurdles, and limited digital infrastructure continue to constrain potential growth in this area.
The World Bank urged authorities to “stay the course” on stabilisation while accelerating structural reforms to foster competitiveness and export diversification. Analysts say the government’s rhetoric now aligns closely with these recommendations, but sustained political commitment and consistent policy execution will be key to achieving lasting export-led growth.
