ISLAMABAD: Pakistan lacks the industrial capacity, export diversification and productivity levels required to withstand prolonged high inflation in the way Türkiye has managed in recent years, according to a new policy brief released by the Asian Development Bank (ADB).
The study argues that inflation figures alone can be misleading when comparing economies. What ultimately determines a country’s resilience, it says, is the strength of its economic fundamentals, including industrial capability, export competitiveness, productivity, logistics infrastructure, and fiscal capacity. Pakistan, with weaker industrial capabilities, experiences far greater economic strain than other countries with similar inflation levels.
The ADB brief, titled Beyond Inflation: Industrial Capability and External Resilience in Pakistan and Turkiye, contrasts the economic experiences of the two countries and concludes that Pakistan’s vulnerabilities are rooted in structural weaknesses rather than merely monetary or cyclical factors.
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“Türkiye’s economy has continued to grow despite exceptionally high inflation because it possesses a deep and diversified industrial base,” the report notes. “Pakistan, by contrast, faces far greater economic strain under similar inflationary conditions due to its narrow export structure and weak industrial capabilities.”
According to the report, Türkiye’s manufacturing sector spans advanced industries such as automotive production, machinery and equipment manufacturing, while Pakistan remains heavily dependent on traditional sectors including textiles, leather products, and food processing.
These three sectors alone account for more than 73% of Pakistan’s exports, highlighting the country’s limited diversification. Pakistan’s share of global exports has remained stagnant at roughly 0.2%, despite repeated currency depreciations intended to boost competitiveness.
The ADB argues that exchange-rate depreciation has fundamentally different effects in the two economies. In Turkiye, a weaker currency often boosts exports and foreign exchange earnings because firms can rapidly scale production and compete in international markets. In Pakistan, however, depreciation mainly raises the cost of imported fuel, machinery, raw materials, and other essential inputs, fueling inflation without generating a comparable export response.
“Pakistan’s tradable sector is too narrow to offset rising import costs through higher exports,” the report says.
The study also highlights stark differences in fiscal capacity. Turkiye maintains a tax-to-GDP ratio of around 17–18%, nearly double Pakistan’s 9–10%, providing Ankara with greater room to support industry, absorb economic shocks, and implement countercyclical policies.
Foreign direct investment presents another major contrast. Turkiye consistently attracts larger and more stable inflows, benefiting from reforms in governance, labor markets, and financial regulation. These investments have helped integrate Turkish firms into global value chains and supported technological upgrading.
Pakistan, meanwhile, continues to attract relatively modest levels of FDI, limiting access to advanced technologies, management expertise, and export markets.
The report points out that remittances have helped Pakistan avoid severe external-sector crises, contributing between 6% and 9% of GDP over the past decade. However, it warns that remittances cannot substitute for export-led industrial transformation.
“Remittances support consumption and help smooth economic shocks, but they do not directly create industrial capacity, productivity growth, or export competitiveness,” the brief states.
ADB researchers also emphasize the importance of logistics and connectivity. Türkiye’s strategic location between Europe, the Middle East, and Central Asia is reinforced by advanced ports, rail links, and integrated supply chains, enabling manufacturers to respond quickly to global demand.
Pakistan, despite its geographic position and access to seaports, continues to struggle with transport bottlenecks, weaker logistics networks, and higher trade costs, limiting its ability to capitalize on export opportunities.
Copyright Business Recorder, 2026
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