ISLAMABAD: Pakistan’s export potential is being undermined by its continued dependence on imports — especially from China — leading to persistent trade imbalances despite opportunities in global markets.
According to the Economic Survey 2024-25, released on Monday, the recovery in developed economies had created favorable conditions for exports.
However, an 11.8% increase in imports outpaced the 6.8% growth in exports, leading to a negative trade balance in goods.
The government, meanwhile, struggles to effectively harness export potential or reduce its import dependency.
Export Opportunities vs. Rising Imports
The survey noted that global trade growth is projected to slow to 1.7% in 2025.
Pakistan is seeking to strengthen economic buffers by expanding exports and deepening trade ties amid geopolitical and financial uncertainties.
A recent breakthrough in resolving import issues related to soyabean and beef products from the United States is expected to enhance trade with one of the world’s largest economies.
The textile sector, Pakistan’s leading export industry, heavily depends on cotton imports, especially from the US.
In FY24 alone, Pakistan imported over $700 million worth of raw cotton, which is projected to increase further.
Service exports showed a 9.3% growth, slightly ahead of the 7.9% growth in service imports, providing some balance in the trade of services.
Fiscal Strain and External Pressures
Despite an increase in remittances — which reached a historic high of $4.1 billion in March — Pakistan’s financial account recorded an outflow of $1.6 billion during July-April FY25.
This contrasts with a net inflow of $4.2 billion in the same period last year, largely due to increased debt repayments and reduced disbursement of foreign loans.
Still, the current account swung to a surplus of $1.9 billion — a significant reversal from a $1.3 billion deficit the year before.
This marks only the second time since FY03 that the external sector posted such a surplus.
On the fiscal front, markup payments surged by 17% year-on-year to Rs6.4 trillion due to rising public debt.
However, a reduction in the policy rate has allowed the government to save around Rs800 billion to Rs1 trillion in debt servicing costs.
