Conclusions drawn by a committee formed by Prime Minister Shehbaz Sharif to devise a strategy for avoiding another IMF programme once the current $8.4bn arrangement expires at the end of 2027 has confirmed the widely held perception that cost of doing business is inhibiting efforts to increase exports and a tariff overhaul was needed to lift exports beyond $60 billion in three years.
The committee led by Minister for Planning Ahsan Iqbal cautioned that current state of affairs was not capable of driving a fast-growing population of 250 million towards sustained prosperity because of cross-cutting constraints affecting all 20 priority export products and six export drivers. In fact, the panel has highlighted what is already known to all concerned but strangely enough no serious effort is being made to address the issue of high production cost that renders our exports incompetitive. The government has been in a denial mode whenever it was pointed out that the energy tariff was one of the highest in the region because of frequent price increases done under advice and pressure of the IMF. Now the committee has observed that ‘export competitiveness is undermined by high and volatile energy costs, with electricity and gas tariffs remaining above regional benchmarks and subject to frequent changes’. It warned that volatility was inflating production costs across manufacturing, agro-processing, minerals, fisheries, and services, eroding margins and diverting orders to competing countries. The recommendations made by the committee about easing electricity and gas prices through debt refinancing and rationalising price build-ups require priority attention by the government. It has also been pointed out that cost of doing business in Pakistan remained ‘structurally high due to fragmented and distortionary taxation, inverted input tariffs, advance income tax deductions, delayed sales tax refunds and persistent working capital lockups’.
Another issue highlighted by the committee is policy unpredictability, which is weakening investment and buyer confidence. Frequent changes in tax policy, energy pricing, tariff structures, export incentives and regulatory regimes constrain forward planning, capacity expansion and scaling, particularly around annual export order booking cycles. In a highly competitive environment, Pakistan needs to focus on quality but innovation is not a priority and therefore, research and development is wanting both in public and private sector. Exporters also faced weak domestic quality, testing and compliance infrastructure, increasing reliance on overseas laboratories for certification and testing. This raises costs, lengthens lead times and elevates rejection risks in regulated export markets, constraining movement into higher value products and destinations. The problem of limited access to finance, especially for the SME sector, also needs to be taken care of by lowering the interest rate and easing collateral requirements. The committee also questioned the implementation of export facilitation and input schemes, including Export Facilitation Scheme, saying procedural delays, higher input costs and working-capital pressures were limiting effective sourcing of raw materials and intermediate inputs.
In addition, there are logistics and trade facilitation bottlenecks, including high inland freight costs, underutilised rail, port congestion, slow customs clearance, inadequate cold-chain infrastructure and weak courier and postal systems for SMEs. Skills gaps, low value addition and weak branding are also barriers to moving into higher-value segments. Ahsan Iqbal has rightly pointed out that 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. This is what the Prime Minister and the Finance Minister too have been saying on different occasions but practical steps must be taken to meet the target of raising exports to $60 billion in three years (from the existing $30 to 35 billion) assuring worthwhile incentive for investment in different sectors of the economy, especially industrialisation and development of agriculture on modern lines.
