The World Bank has asked Pakistan to improve its skewed preferential trade agreements with 10 bilateral partners, ensure a market-determined and flexible exchange rate and push deeper reforms to lower energy and other input costs to turbo-charge over three decades of declining exports for sustainable economic growth.
In a policy note to the government, it observed that exports have declined from 16pc of GDP in the 1990s to just around 10pc in 2024, with the export basket still concentrated in low-value textile and agricultural products. It has also urged Pakistan to maintain a flexible exchange rate to ensure export competitiveness and complement tariff reform.
No one would dispute the observations made by the global lender in respect of declining exports, boom and bust cycle, excessive and redundant red tape and regulation, rising cost of input and the need for stronger trade facilitation. However, the recommendations made by the Bank are somewhat lopsided and might complicate the woes of the country and its people. It is a fact that Pakistan’s exports, instead of increasing, are decreasing despite high sounding claims by the successive governments and policies introduced by them. It has, however, become a fashion to relate the prospects of a meaningful increase in exports to the oft-tried formula of liberalization of the exchange rate. Pakistan massively devalued its currency under foreign pressure and advice of economic experts during the last three/four years but the World Bank itself has confirmed that exports continued to fall and there is no evidence that exports picked up due to devaluation. How can we boost exports when there is no surplus production, cost of input is rising, research and development is non-existent, quality is compromised and no focus on genuine diversification. In this backdrop, further devaluation would compound difficulties of inflation-ridden masses without any worthwhile increase in exports. Similarly, both the International Monetary Fund (IMF) and the World Bank are insisting on tariff reforms, which mean lowering import duties, a strategy that is most likely to undermine interests of domestic industries and put more strains on borrowed foreign exchange reserves. The assessment of the WB about the shallow and limited nature of preferential trade agreements is quite relevant and speaks volumes about the inability of our negotiators to secure national interests during talks with other countries. The policy and decision-makers should pay heed to the advice of the Bank to enhance the capacity of the negotiation unit through targeted training, ensure regular consultations with exporters and industry to align agreements with business opportunities and establish mechanisms to monitor implementation and performance of trade agreements.
