KARACHI: Despite a series of tax concessions and policy incentives aimed at boosting exports, economists warn that Pakistan’s export sector will struggle to achieve sustainable growth unless long-standing structural challenges are addressed.
Pakistan’s external account remained under pressure during the current fiscal year, although strong remittance inflows helped prevent a larger imbalance. The country recorded a modest current account surplus of $255 million during the first 11 months of FY26, significantly lower than the surplus reported during the same period last year. While monthly figures fluctuated, record remittances continued to provide vital support to the economy.
Workers abroad sent an unprecedented $4.3 billion in May 2026, pushing total remittances for July-May to $38.1 billion. The inflows are expected to exceed $41 billion by the end of the fiscal year, offering relief to policymakers seeking to strengthen foreign exchange reserves amid regional uncertainty.
However, trade performance remains a major concern. Pakistan’s merchandise trade deficit expanded to nearly $35 billion during the period as imports increased while exports declined. Goods exports fell to around $28 billion, highlighting persistent weaknesses in the country’s export sector.
The technology sector emerged as a rare success story, with IT and digital services exports rising more than 20% year-on-year. Technology exports reached a record $4.2 billion during the first 11 months of FY26 and are expected to surpass $4.5 billion by year-end. The sector has become an increasingly important source of foreign exchange earnings as traditional export industries face mounting challenges.
In contrast, the textile industry, which accounts for more than 60% of Pakistan’s exports, showed little growth despite remaining the country’s largest export sector. While value-added apparel exports registered some gains, exports of basic and intermediate textile products declined. Analysts argue that years of subsidies, preferential tax treatment and export support programmes have failed to resolve deeper issues such as low productivity, rising production costs and declining international competitiveness.
Experts believe that government support measures have often provided temporary relief rather than addressing the fundamental problems limiting export expansion. As a result, the sector continues to face pressure despite repeated policy interventions.
To encourage export growth, the government has introduced several relief measures in the new budget. These include changes to taxation for textile exporters, the removal of certain levies and the extension of concessional tax rates for the IT sector. Taxes on foreign digital transactions have also been reduced to support freelancers and technology entrepreneurs.
While these incentives may ease financial pressures on businesses, economists caution that tax concessions alone cannot overcome broader obstacles such as high energy costs, regulatory burdens and inefficiencies that increase the cost of doing business.
They argue that Pakistan must diversify its export base and improve competitiveness across multiple industries rather than relying heavily on a few sectors. Without meaningful structural reforms, they warn, export growth will remain limited and the country’s dependence on remittances to support external stability will continue.
