The World Bank has warned that Pakistan’s exports are declining as a share of GDP and remain well below their potential, indicating an estimated $60 billion in untapped export capacity. The Bank identified high tariffs, complex regulations, costly energy, and logistics inefficiencies as major barriers to export growth.
In its Pakistan Development Update, the World Bank noted that since 2000, exports as a share of GDP have continuously declined, falling from an average of 16% in the 1990s to just 10.4% in 2024. As a result, Pakistan’s economic growth has become increasingly dependent on borrowing and remittances, fueling recurring boom-and-bust cycles.
The report highlighted that Pakistan’s export performance, once ahead of Bangladesh and India, has now fallen behind both and also lags behind the averages of Lower-Middle-Income Countries (LMICs) and Upper-Middle-Income Countries (UMICs). This decline has widened the gap between Pakistan’s actual exports and its export potential.
According to the Bank’s estimates, based on economic fundamentals such as population size, development level, and proximity to major markets, Pakistan’s unused export potential stands at around $60 billion. Bridging this gap would bring Pakistan in line with UMIC averages, but would require doubling its current export-to-GDP ratio.
The World Bank urged broad-based reforms to drive export-led growth, including:
- A market-based exchange rate,
- Stronger trade finance mechanisms,
- Improved logistics and compliance systems,
- Deeper trade agreements, and
- Expansion of digital and energy infrastructure,
to support export growth, particularly in emerging IT services.
The report recommended establishing a deep and liquid interbank market without direct State Bank of Pakistan (SBP) intervention, encouraging participation from exporters, importers, and foreign investors. It also suggested publishing detailed interbank transaction data, including volumes and participants, and phasing out temporary interventions to ensure the exchange rate reflects real supply and demand.
Due to sluggish export volume growth, price fluctuations rather than quality or innovation have been the main driver of export performance, leaving Pakistan more vulnerable to global price shocks.
Under the FY2026 federal budget, Pakistan approved a five-year National Tariff Plan, outlining reforms to reduce the simple average tariff from 20.2% to 9.7% by 2030. If fully implemented, Pakistan would rank among the top global tariff reformers, joining Vietnam and Cambodia among LMICs, and placing in the top 10 worldwide in terms of tariff reduction over the past two decades.
The report also noted that although digitally delivered exports now account for nearly 10% of total exports, Pakistan’s global share in digital exports remains extremely low—just 0.1%.
Currently, Pakistan captures only 0.1% of the global digital services market, far behind India (5.8%) and Indonesia (0.2%). Despite robust growth in IT services—where Pakistan is South Asia’s second-largest exporter after India, with annual exports exceeding $2.9 billion—its global share remains just 0.3%, underscoring the vast untapped potential in the digital economy.
The report concluded that with stronger institutional reforms, modernized infrastructure, and investment in innovation and skills, Pakistan can unlock its export potential and shift toward a sustainable, export-led growth model.
