The World Bank has urged Pakistan to reform its trade policy, adopt a flexible exchange rate, and implement major structural changes to strengthen its struggling export sector. The global lender said that without serious reforms, Pakistan risks continued economic instability and missed export opportunities.
In a policy note shared with the government, the World Bank highlighted that Pakistan’s exports have declined sharply over the past three decades — from 16% of GDP in the 1990s to only 10% in 2024. It noted that the export basket remains dominated by low-value textiles and agricultural products, while the economy relies heavily on debt and remittance-driven consumption.
The Bank recommended that Pakistan allow the rupee to move freely based on market supply and demand. It urged the government to avoid ad hoc central bank interventions and publish more transparent interbank market data. Encouraging wider participation from exporters, importers, and foreign investors would help deepen the foreign exchange market and build confidence, it said.
The World Bank also pointed out that Pakistan’s preferential trade agreements remain narrow and underutilized. It advised expanding existing trade deals to include services and investments while seeking new opportunities in non-traditional markets such as Sub-Saharan Africa and Latin America.
The report blamed weak export performance on high input costs, heavy regulation, and an oversized public sector with more than 200 state-owned enterprises. High energy and logistics expenses were also cited as major barriers to industrial competitiveness.
While the Bank welcomed Pakistan’s recent tariff reforms, it stressed the need to complement them with a flexible exchange rate, full activation of the EXIM Bank, and improved trade facilitation. Strengthening the National Tariff Commission to enforce anti-dumping measures and ensuring regular consultations with exporters were also key recommendations.
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The World Bank warned that without urgent action, Pakistan will continue to face boom-and-bust cycles, rising external vulnerabilities, and declining investor confidence.
