Pakistan struggles to boost exports as production costs surge

January 16, 2025 (MLN): Pakistan's economy suffered a heart attack but survived barely thanks to drastic measures, taming consumption with reduced production and administering a strong dose of higher interest rates.

But now the anemic patient needs strength, growing the economy in the past relied on imports – a remedy that bleeds foreign exchange reserves dry, inevitably sending Pakistan back to see doctor IMF.

Cognizant of this fact, authorities want exports to lead the way – a prudent strategy, but one that poses significant challenges.

Prime Minister's words echo this urgency, Pakistan's economy won't grow until input costs are reduced – a stark reality check for exporters aspiring to lead the growth charge.

When asked Zubair Motiwala how to address this conundrum, the Trade Development Authority of Pakistan (TDAP) Chairman's response was candid, officials prioritizing certain interests over national economic growth causes challenges.

He emphasized that IMF conditions aren't the sole culprit rather, internal factors hinder Pakistan's competitiveness.

This perspective shifts the focus from external pressures to domestic reforms.

The Chairman highlighted Pakistan's role in manufacturing for big brands, which prioritize price over production location.

Pakistan produces goods for renowned brands, with these brands often providing even the barcodes for packaging – a testament to the country's manufacturing capabilities.

However, these brands don't mind shifting production to Bangladesh or Vietnam if Pakistan's prices remain high.

European economic difficulties create opportunities for Pakistan if production costs, especially energy, can be managed.

The continent's reduced buying power shifts consumer preference towards low-end, cheaper products – a perfect playground for Pakistan's exporters if they can match competitors' prices.

Big discounters are entering the market, buying in bulk and selling at fixed prices – a scenario where Pakistan could thrive if energy costs are reduced.

Chairman TDAP urged the government to provide a level playing field for exporters to compete regionally and requested help, stating "Exporters are in trouble."

This plea emphasizes the need for immediate attention and relief.

The government must consider strategies to reduce energy costs, such as conducting energy audits, managing machines efficiently, and generating energy in-house.

Pakistan's economic growth hinges on addressing these challenges.

By providing a level playing field for exporters and reducing input costs, authorities can empower Pakistan's economy to thrive in challenging times.

The TDAP Chairman's words serve as a stark reminder.

Pakistan's exporters need support to compete globally. Will authorities heed this plea, or will Pakistan's economy continue to struggle? The fate of Pakistan's economic growth hangs in the balance.

Pakistan's trade deficit in December 2024 increased notably by 34.8%, standing at $2.44 billion compared to $1.81bn, according to data released by the Pakistan Bureau of Statistics (PBS).

On a month-on-month (MoM) basis, the deficit widened by 46.61%, compared to $1.66bn in November 2024.

The deficit widened due to a 14% YoY surge in imports and a 17.44% MoM increase, reaching $5.28bn in December 2024.

Exports remained relatively stable at $2.84bn in December 2024.

Cumulatively, in the first six months of the fiscal year 2024-25, the trade deficit remained largely unchanged, with a meager increase of 0.18%, rising to $11.17bn compared to $11.15bn in 6MFY24.

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