The World Bank has urged Pakistan to implement sweeping reforms to its trade and exchange rate policies, warning that without decisive action, the country will continue to face weak export performance, economic volatility, and limited global competitiveness. In its latest policy note shared with the government, the institution emphasized that Pakistan’s export share has steadily declined over the past three decades, falling from nearly 16 percent of GDP in the 1990s to just 10 percent in 2024. This prolonged decline, the Bank noted, has hindered the country’s ability to build foreign exchange buffers and achieve sustainable economic growth.
According to the World Bank, Pakistan’s economic model has remained consumption-driven, relying heavily on remittances and external borrowing rather than export expansion and productivity growth. This structure has created recurring balance-of-payments pressures and heightened vulnerability to global market shocks. The Bank stated that Pakistan must shift toward a high-productivity, trade-oriented strategy by adopting a fully market-determined exchange rate, allowing the rupee to adjust freely to supply and demand conditions. It called for phasing out ad hoc interventions by the central bank and improving transparency by publishing detailed interbank market data to build investor trust and attract participants, including exporters, importers, and foreign investors.
Pakistan’s trade agreements, the Bank observed, have limited coverage and have not been fully exploited to expand market access or integrate into global value chains. Its current trade portfolio remains concentrated in low-value textiles and basic agricultural goods, while opportunities in services, higher-value manufacturing, and technology sectors remain underdeveloped. The World Bank recommended deepening existing trade agreements, expanding their scope to include services and investment, and exploring new trade partnerships, especially with emerging markets across Sub-Saharan Africa and Latin America.
At the structural level, the Bank pointed to high input costs, policy uncertainty, and overregulation as major factors constraining productivity and private sector investment. Pakistan’s heavy state footprint, including more than 200 state-owned enterprises, was also highlighted as a barrier to competitiveness. Energy shortages, high power tariffs, and logistical inefficiencies have further weakened export potential and business confidence.
Acknowledging recent tariff reforms, the World Bank noted that improvements must be paired with deeper institutional support and policy execution. Key recommendations included accelerating the operationalization of the EXIM Bank of Pakistan, enhancing trade facilitation systems, and strengthening the National Tariff Commission to effectively handle anti-dumping and safeguard measures. The institution emphasized the importance of structured dialogue with exporters to ensure that policy frameworks align with industry needs and global market realities.
The policy note concluded that without a decisive shift in policy direction, Pakistan risks persistence of economic instability, limited export growth, and continued reliance on external financing. Sustainable improvement, the Bank stressed, requires coordinated reforms across trade policy, currency management, regulatory strategy, and private sector development.
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