s curtains drop on 2024, Pakistan’s trade and economic landscape is a mosaic of resilience, ambition and unyielding challenges. The year bore witness to an economy grappling with structural weaknesses yet striving to unlock its potential.

The macroeconomic environment, underpinned by exchange rate volatility, inflationary pressures and persistent fiscal deficits, cast its shadow over trade dynamics. However, glimmers of hope emerged from a steady recovery in exports, increased integration into regional trade corridors and significant strides in export of services.

The rupee had a turbulent year, oscillating under the weight of global economic pressures and domestic imbalances. A depreciated rupee gave a competitive edge to exporters but inflated the import bill, particularly for fuel and industrial machinery, adding to the trade deficit.

Persistently high inflation eroded consumer purchasing power and affected domestic demand for imported goods. Despite these challenges, the steps taken by the government for tariff rationalisation and export incentivisation sought to incrementally mitigate the imbalances.

A close examination of trade activity reveals a year of mixed outcomes. The export of goods grew steadily, exceeding $30 billion by November 2024. Textile exports continued their upward march, with bedwear and knitwear achieving notable growth.

Demand from traditional markets in the EU and North America remained robust. This was bolstered by Pakistan’s compliance with global labour and environmental standards under the GSP+ programme. Agricultural exports too showed positive trends, with rice, mangoes and citrus fruits finding ready markets in the Gulf and Central Asia. The services sector became a rising star, with exports in IT and digital services crossing the $3 billion mark, reflecting the potential of Pakistan’s human capital in the global technology landscape.

However, imports were a different story. Machinery imports surged as Pakistan invested in renewable energy projects and infrastructure development, a positive signal for long-term productivity but an immediate strain on the current account.

Energy imports, including oil and LNG, remained high, reflecting the structural deficiencies in domestic energy production. Food imports, though moderated, still reflected inefficiencies in domestic agricultural systems that need modernisation to ensure food security and reduce reliance on external supplies.

Trade deficits, while narrowing marginally in certain months due to export growth, remained a persistent challenge. Pakistan’s heavy reliance on imported fuels and machinery meant that exchange rate fluctuations and global price added to fiscal stress.

Certain policy moves showed promise. Regulatory duties on luxury items curtailed non-essential imports. Strategic partnerships with countries like Turkmenistan and the UAE opened new avenues for trade diversification. Operationalisation of the Trans-Afghan Railway and the Gwadar Free Trade Zone highlighted efforts to enhance regional connectivity, even as bilateral trade with key partners like China required revitalisation.

A significant contributor to streamlining trade in 2024 was the Pakistan Single Window, a comprehensive digital platform designed to integrate and simplify the trade processes. By reducing bureaucratic hurdles, the PSW enhanced transparency and efficiency, allowing exporters and importers to file trade documents electronically.

This system eliminated redundancies, reduced processing times and lowered transaction costs for businesses. By consolidating multiple documentation requirements into a single digital portal, the PSW made it easier for small and medium enterprises (SMEs) to engage in international trade.

The need to strengthen regional trade ties is critical. The Trans-Afghan Railway and Gwadar port projects offer a gateway to Central Asia and beyond. Political stability and reliable infrastructure are prerequisites for its success.

The initiative also helped align Pakistan with global trade facilitation standards, improving its ranking in ease of doing business indices. While its full potential remains to be realised, the PSW is a vital step towards modernising Pakistan’s trade infrastructure and supporting sustained economic growth.

Chronologically speaking, the trade ecosystem saw some noteworthy milestones. January began with a renewed focus on digital trade facilitation as the Pakistan Single Window system expanded to streamline export and import processes.

By mid-year, the second phase of the China-Pakistan Economic Corridor saw operational advances, particularly in Special Economic Zones that encouraged joint ventures in manufacturing and agriculture. Export of sports goods and IT services surged, supported by global events and digital innovation. The latter months highlighted certain vulnerabilities, as rising global commodity prices and domestic power outages highlighted the pressing need for structural reforms in energy and industrial policy.

Policy discussions surrounding trade barriers frequently returned to perennial issues: exchange rate mismanagement, energy inefficiencies and limited export diversification. Pakistan’s trade mix remains dominated by textiles, with other sectors like engineering goods and pharmaceuticals struggling to gain a foothold in international markets. This lack of diversification renders the country vulnerable to demand shocks in its primary markets, which are often cyclical.

Looking ahead, some policy measures could help transform the challenges into opportunities. Foremost among these is the need for energy sector reform. Persistent reliance on imported fuels is a fiscal time bomb demanding a shift towards renewable energy.

Expanding domestic production of solar panels, wind turbines and hydroelectric infrastructure could reduce import dependence and provide green export opportunities. Coupled with this, investments in grid modernisation and energy efficiency can bolster industrial productivity, enabling exporters to compete on cost and reliability.

Export diversification must move from rhetoric to reality. While textiles have traditionally anchored Pakistan’s trade, sectors like IT, engineering goods and processed foods hold untapped potential. Targeted government support, including tax incentives, research and development funding and skill development programmes can accelerate their entry into global markets.

The need to strengthen regional trade ties is critical. The Trans-Afghan Railway and Gwadar port projects offer a gateway to Central Asia and beyond, but political stability and reliable infrastructure are prerequisites for their success.

On the import side, promoting domestic production of intermediate goods like chemicals and components for machinery could reduce reliance on external suppliers. The industrial policy should focus on import substitution where feasible, particularly in sectors like agriculture, where inefficiencies in supply chains often lead to avoidable imports.

Trade in services trade, especially IT, represents a bright spot with immense potential. Pakistan’s young, tech-savvy workforce is a great asset. Further investment in digital infrastructure, education and access to global freelancing platforms could propel this sector to new heights. However, achieving this requires policy coherence, including a stable regulatory framework and affordable internet access for all.

Trade facilitation is a low-hanging fruit. Expanding the Pakistan Single Window system, digitising customs processes and reducing non-tariff barriers can lower the cost of doing business and enhance the country’s appeal as a trading partner. Maintaining compliance with international trade standards, particularly those tied to environmental and labour regulations, is non-negotiable for retaining access to lucrative markets like the EU.

The story of international trade in 2024 has been one of cautious optimism tempered by structural realities. While the strides made in export growth and regional connectivity are commendable, they must be viewed as the first steps on a long journey towards sustainable trade prosperity.

The interplay of policy, global market dynamics and domestic economic resilience will determine whether Pakistan can turn its trade ambitions into a transformative growth story. For now, the signs are encouraging. However, the work has just begun.

The writer, an associate research fellow at Sustainable Development Policy Institute, is heading the SDPI Centre for Private Sector Engagement. He can be reached at ahad@sdpi.org. The article doesn’t necessarily represent the views of the organisation.