Pakistan’s exports are currently facing a significant downturn, with goods exports falling to $15.2 billion in the first half of FY26, down from $16.6 billion during the same period last year. This contraction has pushed the trade deficit wider to $19.2 billion, triggering growing concern within both government and industry circles about the country’s external sector sustainability.
A major reason behind this decline is the exceptionally high cost of doing business in Pakistan compared to competing economies. Industrial electricity and gas tariffs remain elevated, interest rates are still restrictive, and exporters face a web of multiple taxes along with chronic delays in refunds. Electricity and gas tariffs for industry continue to exceed regional benchmarks by a wide margin. These costs stem from deep-rooted inefficiencies, poorly targeted subsidies, and the persistent treatment of productive sectors as instruments of fiscal extraction rather than engines of economic growth. For export-oriented firms, energy costs translate directly into higher unit prices, squeezing margins and pricing Pakistani products out of competitive international bids. Global buyers do not wait for domestic policy corrections; they simply redirect orders to more reliable and cost-effective suppliers.
According to the Pakistan Business Forum, the cost of doing business in Pakistan is estimated to be around 34 percent higher than in comparable regional economies. Exporters operating under such conditions are steadily losing price competitiveness in international markets where survival depends on efficiency and predictability. For an economy desperately seeking export-led growth to generate employment and earn foreign exchange, this disadvantage is not only alarming but fundamentally unsustainable. Compounding the problem are logistics inefficiencies, port congestion, and weak transport infrastructure, all of which further inflate costs and erode the competitiveness of Pakistani goods abroad.
Meanwhile, regional competitors such as Bangladesh, Vietnam, and India have expanded their global market share by maintaining lower cost structures, ensuring policy continuity, and offering predictable operating environments. Pakistan, by contrast, has allowed costs to spiral upward through policy choices that actively undermine industrial competitiveness and discourage long-term investment.
It is particularly concerning that Pakistan’s exports have remained largely stagnant for more than a decade, raising serious questions about the country’s long-term economic viability. While regional peers such as Bangladesh, Vietnam, and India have dramatically expanded their export bases, Pakistan continues to struggle with weak growth, limited diversification, and declining competitiveness. This prolonged stagnation reflects structural weaknesses rather than temporary global headwinds.
One of the most significant contributors to this stagnation is Pakistan’s heavy reliance on a single sector. Textiles and apparel account for nearly 55 to 60 percent of total exports, leaving export earnings highly vulnerable to fluctuations in global textile demand. In contrast, competing economies have diversified into engineering goods, electronics, pharmaceuticals, processed foods, and technology-based services. Pakistan has largely failed to develop alternative export sectors at scale, leaving the economy exposed to sector-specific shocks.
Moreover, Pakistan primarily exports raw or semi-processed goods instead of finished, branded products. Cotton yarn is shipped abroad rather than high-end garments, rice is exported in bulk instead of packaged brands, and raw leather leaves the country instead of being transformed into value-added footwear and accessories. As a result, Pakistan earns significantly less than countries exporting finished products, even when relying on similar raw materials. Value addition in Pakistan’s export basket is urgently needed, particularly as product quality rankings have declined over time. Volume-wise, Pakistan exports more than Bangladesh in certain categories, yet Bangladesh earns far higher export revenues due to superior value addition and branding.
Exporters consistently point to policy inconsistency as a major obstacle. Frequent changes in tax regulations, abrupt import and export restrictions, delayed incentive payments, and unpredictable regulatory decisions discourage long-term planning and investment. Without stable and transparent policies, exporters are unable to expand capacity, upgrade technology, or move into higher-value segments.
Adding to these challenges is the absence of a coherent, long-term export-led growth strategy. Pakistan has limited integration into global value chains, weak trade diplomacy focused on securing market access, and insufficient institutional support for small and medium enterprises seeking to enter export markets. While other countries actively nurture exporters through coordinated industrial, trade, and skills policies, Pakistan’s approach remains fragmented and reactive. Past power shortages and unreliable gas supplies have also damaged Pakistan’s credibility as a dependable supplier. In agriculture, inadequate cold storage and transport infrastructure result in post-harvest losses and missed export opportunities.
Global buyers increasingly demand timely delivery, consistent quality, and adherence to strict standards—areas where Pakistan continues to lag. Low labour productivity, limited automation, and weak investment in research and development have confined the country to low-value segments of global markets. As international trade moves toward higher quality benchmarks and faster production cycles, Pakistan has been slow to adapt.
Experts widely agree that global economic conditions alone do not explain Pakistan’s export stagnation. Countries facing similar global challenges have managed to expand exports by reforming domestic policies, upgrading industrial capacity, and prioritising value addition. Unless Pakistan diversifies its export base, reduces the cost of doing business, ensures policy stability, and commits to a clear export-led growth strategy, exports are likely to remain stagnant, continuing to strain foreign exchange reserves and suppress economic growth.
The World Bank estimates that Pakistan has an untapped export potential of $60 billion. Realising this potential, however, requires moving beyond short-term fixes such as currency depreciation and focusing on deep structural reforms, including improving labour productivity and integrating meaningfully into global value chains.