EDITORIAL: Pakistan’s external account is once again under acute strain, with the export sector unsurprisingly emerging as the central fault line. November saw exports across all major categories fall, pushing the trade deficit in the first five months of FY2025-26 to USD15.54 billion, a 33 percent year-on-year increase.
The data from the Pakistan Bureau of Statistics (PBS), which was released on December 19, shows exports contracting 14.54 percent year-on-year, with cumulative export earnings falling to USD12.87 billion during July-November from USD13.72 billion in the same period of the previous yaer.. Meanwhile, imports climbed 13.63 percent to USD28.4 billion, up from USD25 billion, widening the external gap and raising renewed concerns about the sustainability of the balance of payments over the medium term.**
The failure of the export sector to get out of the rut it has long been stuck in reflects deep structural constraints: an export base anchored in low-value, low-complexity goods cannot finance a modern import bill or support macroeconomic stability. Reversing the slide demands a fundamental transformation in how the export sector is structured.
And that, in turn, is contingent on wider economic transformation that aligns trade, industry, energy and human capital around competitiveness and value creation. Glaring gaps in industrial policy, low productivity, limited technological upgrading, misaligned energy and trade incentives, and an underdeveloped skills base have all combined to block Pakistani businesses from integrating into global value chains, entering higher-value export markets and strengthening domestic manufacturing.
The November textile numbers offer a clear lesson that policymakers and businesses cannot ignore any longer. Segments concentrated at the lower end of the textile value chain continued to contract, with cotton yarn exports plunging 26 percent, non-cotton yarn 35.5 percent, knitwear 4.9 percent and towels 6.31 percent, pulling overall textile exports down by 2.57 percent. Yet where producers had moved closer to higher value addition and greater responsiveness to international demand, there were encouraging signs.
Readymade garments posted a 9.21 percent increase, while art, silk and synthetic textiles grew 3.47 percent, pointing to the gains available from product upgrading and alignment with evolving consumer preferences. These pockets of resilience demonstrate that export decline can be overturned if there is increased investment and policy support towards higher-value production and market-led adaptation, rather than persisting with segments that no longer offer sustainable export growth.
Revitalising Pakistan’s industrial base, therefore, remains critical if the country is to integrate into global value chains and shift towards the production of higher-value, exportable goods. And achieving this requires attracting sustained foreign direct investment, upgrading technology and building sectoral capacities. Yet structural inefficiencies — exorbitant energy costs and a convoluted, unpredictable tax regime — render production costs uncompetitive, undermining both investment and global market access.
Alongside far-reaching reforms to address these challenges, what we also need is to forge regional trade agreements with economies that can supply essential industrial inputs that would reduce input costs, enhance supply chain resilience and create the conditions for a more competitive, export-oriented manufacturing sector. Without tackling these constraints, the country will struggle to capture the gains offered by integrating into global trade networks.
What is also required is a fundamental shift in mindsets. At the core of the problem lies an outdated approach shared by both government and industry: Pakistan does not produce with the export market in mind.
The current strategy relies largely on offloading domestic surpluses abroad rather than designing and manufacturing goods strategically to meet international demand. To break free from the cycle of low-value exports and perennial trade deficits, government and industry must adopt a proactive export-oriented approach, supported by policies that reduce structural costs, attract investment and foster higher-value production capable of meeting global market needs.
Copyright Business Recorder, 2025
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