Amidst fluctuations in the global economy, the recent export performance of Pakistan has demonstrated resilience and untapped potential. The decline of the current account deficit to $0.5 billion in FY 2024, supported by the IMF’s stand-by arrangement and significant policy measures, signifies a positive shift in the country’s economic outlook.

Significant growth (9.3 percent) in exports indicates the need for strategic measures and continued efforts to strengthen the export sector. Historically, the exports have fluctuated, with periods of robust growth interspersed with declines.

In FY 2024, there was significant progress. The exports rose to a total of $23 billion. The rise can be attributed to a range of measures, such as providing RLNG at cost-effective rates, improving market access, establishing the EXIM Bank and implementing capacity development programs for the textile industry and trade groups.

Together, these efforts have contributed to the overall growth across the export sector, with the exception of textiles. Textiles experienced challenges as a result of declining market demand and falling global prices.

A significant breakthrough in exports was the remarkable 48 percent rise in food exports, which reached $5.6 billion. This improvement was fuelled by enhanced productivity, better prices and higher global demand. Major exported goods, including cotton manufacture, leather and rice, continue to have a substantial market share, making up 68.2 percent of the total exports.

The Pakistan Regulatory Modernisation Initiative, managed by the Board of Investment, is a crucial measure aimed at enhancing the investment ecosystem. The provision of Rs 5 billion for a Markup and Risk Sharing Scheme for Farm Mechanisation is a significant step towards improving food security and export potential, considering that agriculture contributes 24 percent to the GDP and employs 37.4 percent of the workforce.

The significant expansion of funding for the Export Refinance Scheme, from Rs 3.8 billion to Rs 13.8 billion, facilitated by the EXIM Bank, clearly demonstrated the government’s commitment to assisting exporters. The State Bank of Pakistan provision of Rs 539 billion in export credit, specifically targeting SMEs, is expected to have a pivotal impact on improving future export performance. Introducing a risk-sharing programme is a supplementary preventive approach intended for reducing the difficulties faced by exporters.

The federal government’s active strategy toward promoting economic growth and addressing the pressing economic challenges resulted in the signing of 31 B2B collaboration MOUs in the energy, culture, IT, pharmaceuticals, agriculture and food sectors.

It is important to remain focused on enacting reforms, advancing infrastructure development and supporting key sectors. Pakistan has the ability to enhance its exports, boost economic growth and improve its international trade competitiveness.

The potential for sectoral growth, job creation and economic diversification in these partnerships is incredible. However, their effectiveness depends on the successful implementation of policies, political stability and comprehensive economic reforms. In order to ensure that these MOUs result in tangible economic benefits for the country, it is necessary to address the core issues at hand.

Additionally, it is extremely important to put into effect measures focusing on the expansion of digital infrastructure, the promotion of industrial growth in agriculture-related industries and the improvement of research and development in science and technology. Such adjustments need to be made to promote innovation and enhance competitiveness.

The tax adjustments, including a raise in the GST rate on textile and leather for Tier 1 shops from 15 percent to 18 percent, demonstrate a balanced strategy to boost income while providing support to crucial export sectors.

The raise in the GST has the potential to boost government’s revenue, which is necessary for addressing the fiscal deficit and sustaining public goods and services. The higher GST rate will end up raising the retailers’ costs, which could be transferred to consumers, leading to inflated prices for the end products. This may exacerbate inflationary pressures and diminish consumer purchasing power, particularly across a sector that is crucial for employment and exports.

The exemption for imported goods in the solar panel sector indicates a forward-thinking approach focusing on resolving the energy crisis and promoting the use of renewable energy sources. This is consistent with global goals for environmental sustainability.

While this can lower installation costs and enhance competitiveness in both domestic and potentially international markets, its success depends on effective implementation, support for local manufacturing and management of technical challenges, such as infrastructure development and international trade dynamics. Ensuring transparent procedures and avoiding dependency on imported technology are critical for long-term sustainability and economic viability in the sector.

However, the review of the decision to discontinue the custom duty relaxation for the domestic cars production companies should be undertaken carefully to prevent any adverse impacts on the competitiveness of local manufacturing.

Recent growth in exports is a sign of positive outcomes of strategic and carefully planned policy actions. In order to maintain and further advance this progress, it is important to maintain focus on enacting reforms, advancing infrastructure development and providing assistance to key sectors. Pakistan has the ability to enhance its exports, boost economic growth and improve its international trade competitiveness by creating a favorable business climate and addressing underlying problems.

The writer is a project assistant at Centre for Private Sector Engagement. She is based in Islamabad