By Staff Reporter
ISLAMABAD: Pakistan is pushing for sweeping reforms to slash energy costs and revamp trade tariffs in a bid to more than double its exports to over $60 billion within three years, aiming to dodge another bailout from the International Monetary Fund once its current program winds down.
A high-level committee, convened by the prime minister and chaired by Planning Minister Ahsan Iqbal, wrapped up week-long talks with public and private sector players from Jan. 5 to 9, pinpointing entrenched hurdles that have stifled growth in a nation of 250 million people.
The panel’s findings, detailed in compiled synopses, show how fragmented policies and high operational costs are blocking a shift to sustained prosperity beyond mere stabilisation under the IMF’s restrictive terms. The group was tasked with charting a path to sidestep a fresh IMF deal after the existing $8.4 billion arrangement expires at the end of 2027, as economic gauges continue to flash warning signs.
It zeroed in on constraints plaguing all 20 priority export sectors—from textiles and apparel to software, rice, and pharmaceuticals—and six key drivers essential for ramping up outbound shipments. Ironically, these bottlenecks are hardly new, but piecemeal fixes, including those via the Special Investment Facilitation Council, have fallen short of fostering a level playing field that’s fair, equitable, rule-based, and transparent. Without that, the committee warned, Pakistan risks staying mired in a cycle of instability.
Topping the list: sky-high and erratic energy prices that undercut competitiveness. The plan calls for easing electricity and gas tariffs through debt refinancing and a rethink of pricing structures. “Export competitiveness is undermined by high and volatile energy costs, with electricity and gas tariffs remaining above regional benchmarks and subject to frequent changes,” the panel noted. Such swings inflate production expenses in manufacturing, agro-processing, minerals, fisheries, and services, squeezing margins and sending orders to rivals abroad.
Compounding the pain is a structurally burdensome cost of doing business, driven by a patchwork of distortive taxes, inverted duties on inputs, upfront income tax withholdings, sluggish sales tax refunds, and capital tied up in limbo. These hit exporters hardest, especially small and medium enterprises in manufacturing and agriculture, the synopses said. Policy flip-flops add another layer of drag, eroding investor and buyer trust. “Frequent changes in tax policy, energy pricing, tariff structures, export incentives and regulatory regimes, often announced late in the business cycle, constrain forward planning, capacity expansion and scaling, particularly around annual export order booking cycles,” the panel observed.
Institutional silos and red tape aren’t helping. Varying definitions of SMEs across agencies like the State Bank of Pakistan, the Small and Medium Enterprises Development Authority, the Federal Board of Revenue, and provincial bodies limit access to loans, perks, and aid. Overlaps in oversight, arbitrary enforcement, relentless audits, and poor coordination jack up compliance burdens and breed uncertainty.
Exporters also grapple with subpar domestic testing and quality assurance setups, forcing them to lean on foreign labs for certifications—a move that hikes costs, drags out timelines, and amps up rejection odds in stringent markets. This locks Pakistan out of premium products and buyers. Financing woes further hobble upgrades and value addition. Export credit, insurance, guarantees, and long-term loans are underdeveloped, while steep interest rates, hefty collateral demands, and cash crunches throttle SME investments in tech, standards, and growth.
The committee flagged glitches in export schemes like the Export Facilitation Scheme, where bureaucratic snarls, pricier inputs, and capital squeezes hobble raw material sourcing. Logistics snags pile on: exorbitant inland shipping, neglected rail links, jammed ports, tardy customs, spotty cold chains, and unreliable courier services for smaller firms. At Port Qasim, for instance, the lack of dedicated export berths, skimpy handling gear, insufficient covered warehousing, and choked evacuation routes prolong dwell times, inflate fees, and inject unpredictability into shipments. Skills shortages, minimal value addition, and feeble branding round out the barriers to climbing the value ladder.
To sharpen its blueprint, the Planning Commission is now polling the private sector for more granular data, feeding into a tailored, evidence-based roadmap under the Uraan Pakistan initiative. “Pakistan’s development, economic sovereignty and even national security now hinge on one thing: how fast we can grow our exports and move to an export-led growth model,” Iqbal said at the close of the sessions. He stressed that “the only way to break free from foreign crutches and avoid the next IMF programme is to rapidly increase our exports and build strong foreign exchange reserves.”
The 20 sectors spanned copper, gems and jewelry, IT services, fish products, rice, fruits and vegetables, meat, guar gum, handicrafts, textiles, sports goods, leather, surgical instruments, chemicals and pharma, cement, carpets, engineering goods, footwear, plastics, and cutlery. Pakistan’s goods exports hover around $30 billion to $35 billion annually, far below the commission’s estimate of untapped potential exceeding $60 billion. The panel’s diagnostics and targeted fixes will be bundled for the prime minister’s review, though rollout hinges on navigating the IMF’s stringent conditions.
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