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As the curtains fall on 2024, Pakistan’s trade and economic landscape is a mosaic of resilience, ambition and insurmountable challenges. The year witnessed an economy plagued by structural weaknesses yet trying to unlock its potential.
The macroeconomic environment under the influence of exchange rate volatility, inflationary pressures and persistent fiscal deficit has cast its shadow on trade dynamics. However, a steady recovery in exports, increased integration in regional trade corridors and significant progress in services exports have led to a glimmer of hope.
The rupee has had a tumultuous year, reeling under the weight of global economic pressures and domestic imbalances. Rupee depreciation gave exporters a competitive edge but increased the import bill, particularly for fuel and industrial machinery, widening the trade deficit.
Persistently high inflation eroded consumer purchasing power and affected domestic demand for imported goods. Despite these challenges, measures taken by the government to correct tariffs and provide export incentives have attempted to gradually reduce the imbalance.
A closer look at trading activity reveals a year of mixed results. Exports of goods increased steadily, surpassing $30 billion by November 2024. Textile exports continued their upward march, with bedwear and knitwear achieving notable growth.
Demand from traditional markets in the European Union and North America remained strong. This was reinforced by Pakistan’s compliance with global labor and environmental standards under the GSP+ programme. Agricultural exports also showed positive trends, with rice, mangoes and citrus fruits finding ready markets in the Gulf and Central Asia. The services sector has become a rising star, with exports in IT and digital services exceeding $3 billion, reflecting Pakistan’s human capital potential in the global technology landscape.
However, imports were a different story. Machinery imports rose as Pakistan invested in renewable energy projects and infrastructure development, a positive sign for long-term productivity but an immediate strain on the current account.
Energy imports, including oil and LNG, remained high, reflecting structural shortfalls in domestic energy production. Food imports, although moderate, still reflect the inefficiencies of the domestic agricultural system that needs to be modernized to ensure food security and reduce dependence on external supplies.
The trade deficit, while narrowing marginally in some months due to increased exports, remained a persistent challenge. Pakistan’s heavy reliance on imported fuel and machinery meant that exchange rate fluctuations and world prices added to fiscal pressures.
Some policy initiatives showed promise. Regulatory duties on luxury items reduced unnecessary imports. Strategic partnerships with countries like Turkmenistan and the United Arab Emirates opened up new avenues of trade diversification. The operationalization of the Trans-Afghan Railway and the Gwadar Free Trade Zone underscore efforts to enhance regional connectivity, even as bilateral trade with key partners such as China is needed.
A key contributor to trade facilitation in 2024 was the Pakistan Single Window, a comprehensive digital platform designed to integrate and simplify trade processes. By reducing bureaucratic hurdles, PSW enhances transparency and efficiency, allowing exporters and importers to file trade documents electronically.
The system eliminated redundancies, reduced processing times and reduced transaction costs for businesses. By consolidating multiple document requirements into one digital portal, PSW makes it easier for small and medium enterprises (SMEs) to engage in international trade.
There is a need to strengthen regional trade relations. The Trans-Afghan Railway and Gwadar port projects offer a gateway to Central Asia and beyond. Political stability and reliable infrastructure are essential for its success.
The move also helped align Pakistan with global trade facilitation standards, improving its ranking in ease of doing business indicators. While its full potential is yet to be realized, PSW is an important step towards modernizing Pakistan’s trade infrastructure and supporting sustainable economic growth.
Historically, the trading ecosystem has seen some notable milestones. January began with a renewed focus on digital trade facilitation as the Pakistan Single Window System was expanded to streamline export and import processes.
By mid-year, the second phase of the China-Pakistan Economic Corridor saw operational progress, particularly in special economic zones that encouraged joint ventures in manufacturing and agriculture. Exports of sports goods and IT services increased, supported by global events and digital innovation. The following months highlighted some weaknesses, as rising global commodity prices and domestic power outages underscored the critical need for structural reforms in energy and industrial policy.
Policy debates around trade barriers often return to perennial problems: exchange rate mismanagement, energy inefficiencies and limited export diversification. While textiles continue to dominate Pakistan’s trade mix, other sectors such as engineering goods and pharmaceuticals are struggling to gain a foothold in international markets. This lack of diversification leaves the country vulnerable to demand shocks in its core markets, which are often cyclical.
Looking ahead, some policy measures can help turn challenges into opportunities. Chief among them is the need for reforms in the energy sector. Persistent dependence on imported fuels is a financial time bomb that calls for a shift to renewable energy.
Increasing domestic production of solar panels, wind turbines and hydroelectric infrastructure can reduce import dependency and provide green export opportunities. In addition, investments in grid modernization and energy efficiency can boost 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, there is untapped potential in sectors such as IT, engineering equipment and processed foods. Targeted government support, including tax incentives, research and development funding and skill development programs can accelerate their entry into global markets.
There is a need to strengthen regional trade relations. The Trans-Afghan Railway and Gwadar port projects offer a gateway to Central Asia and beyond, but political stability and reliable infrastructure are essential to their success.
On the import side, promoting domestic production of intermediate goods such as chemicals and machinery components can reduce dependence on external suppliers. Industrial policy should focus on import substitution where possible, particularly in sectors such as agriculture, where supply chain inefficiencies often lead to avoidable imports.
Trading in services, 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 can propel the sector to new heights. However, achieving this requires policy coherence, including a stable regulatory framework and affordable internet access for all.
Commercial convenience is low-hanging fruit. Expanding Pakistan’s single window system, digitizing customs processes and reducing non-tariff barriers can reduce the cost of doing business and increase the country’s appeal as a trading partner. Maintaining compliance with international trade standards, particularly those linked to environmental and labor regulations, is non-negotiable for maintaining access to lucrative markets such as the EU.
The story of international trade in 2024 has been one of cautious optimism due to structural realities. While the progress made in export growth and regional connectivity are laudable, they should be seen as the first steps in 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 author, an associate research fellow at the Sustainable Development Policy Institute, heads the SDPI Center for Private Sector Engagement. He can be contacted at ahad@sdpi.org. The article does not necessarily represent the views of the organization.
