Business
Export fall: looking beyond numbers | The Express Tribune
Tariff reforms need to be focused less on delivering immediate results and rather addressing structural constraints in Pakistan’s economy by reducing taxation costs and improving productivity and competitiveness. Photo: file
ISLAMABAD:
Pakistan’s export of goods has declined in the first half of FY26 as exports decreased to $15.2 billion, down from $16.6 billion a year earlier. This stagnation has caused concern amongst policymakers as the trade deficit widened from $14.5 billion to $19.2 billion. Government officials have been conducting a series of meetings this week with industrial leaders with the goal of addressing the salient concerns of businessmen and arresting the export decline.
A common rallying cry among business leaders to communicate the dire straits of the matter at hand is to declare an ‘export emergency’. Such alarm over worsening macroeconomic indicators is understandable in a country like Pakistan where economic growth has always remained ever so fragile and the memory of the inflationary fire of 2022-2024 is still fresh. But it begs the question whether alarmism and clinging to short-term headline figures is an appropriate strategy to address the country’s structural anti-export bias.
After all, a closer look at the export composition reveals that the decline is driven almost entirely by rice exports as well as a sharp fall in trade with Afghanistan and Central Asia due to border skirmishes. But in a public discourse where the specter of crisis permeates even in the absence of it, policymakers are rewarded for ‘doing something’ rather than laying out comprehensive visions with prudence and sobriety.
A key measure to improve exports that has gone under the radar has been tariff reform and the introduction of the National Tariff Policy (2025-2030). The plan aims to rationalise Pakistan’s complex tariff structure into uniform slabs and reduce the simple average tariff rate from 20.2% to 15.7% in year 1, 13% in year 2 and down to 9.7% by year 5.
Pakistan has historically operated one of the most protectionist tariff regimes in Asia, which increase costs of inputs for exporters, especially the tariffs levied on raw materials and intermediate goods. The high protection from foreign competition also encourages domestic manufacturing to remain inward-looking and target local markets rather than expanding into the global market and competing with regional players like India, Bangladesh, and Vietnam.
Another damaging aspect of Pakistan’s tariffs on exports is the discretionary use of additional customs duties (ACDs) and regulatory duties (RDs). These are para-tariffs in addition to customs duties and are typically levied with little regard for trade policy and rather as a means to plug revenue holes and protect uncompetitive domestic industries. This created unpredictability in costs of imported inputs for exporters and undermined confidence in long-term capital investment in export sectors. The NTP has frontloaded the phasing out of ACDs and RDs in the first two years with the goal of removing distortions created by their discretionary use.
But you might ask, if the tariff policy was so successful in improving export competitiveness, why have exports not risen, rather declined in the first few months of this fiscal year. While tariffs have been identified by the World Bank and other leading economic observers as a key driver in Pakistan’s anti-export bias, a boost to exports after lowering tariffs often occurs after a lag. This is because it takes time for firms to expand operations and economic actors to reallocate capital towards export-oriented industry. But most importantly in the case of Pakistan, investors wait for proof of policy continuity before making long-term investments in export and manufacturing sectors.
This reform measure has not gone unnoticed by international organisations and was highlighted by the World Bank’s bi-annual country development report for Pakistan, published in October. The report acknowledged the ambition of the NTP in liberalising trade and that the implementation of the first year of the policy was one of the largest single-year reductions in trade barriers for a lower-middle income country in the past decade.
World Bank reports on Pakistan have been emphasising ‘structural reforms’ and ‘altering growth trajectories’ for as long as one can remember and even as late as April. But the October report was salient for its notable emphasis on ‘staying the course’ and avoiding the temptation to reverse policy before exports respond to the measures taken.
The real fear, as articulated by the World Bank report and its emphasis on continuity, is not that the reforms will not work, but rather whether or not the country’s policymakers will have the patience to see through the adjustment period and resist the impulse and pressure for policy reversal. A fact often under-appreciated by policymakers in Pakistan is the importance of reputation and credibility in facilitating investor confidence and economic activity.
It is harsh but perhaps not inaccurate to say that Pakistan’s reputation among international investors is of a perpetual IMF patient that cycles between the infirmary and the emergency ward but never leaves the hospital. Our reputation is of a country that is crisis-prone, highly unstable and one where administrations conduct frantic changes of policy, sometimes based on whims.
These fears are not unfounded and have plenty of supporting evidence such as the 1998-99 foreign currency account freeze, the cancellation of the Reko Diq mining lease, sudden import rationing and abrupt trade bans from the 2022-23 crisis just to name a few.
So, for businessmen operating in a country whose policymakers are known for going back on their word and making abrupt, sudden and at times whimsical decisions, the rational medium-term investment decision would be to wait and see if the government’s push for trade liberalisation and implementation of the NTP survives another budget. Until that happens, it should be unsurprising that exports remain stagnant and that investors remain reluctant to commit capital and investment until the reforms carried out by the government gain credibility.
Tariff reforms have the potential to be a game-changer for export competitiveness and allow Pakistan to keep pace with India and Bangladesh in terms of trade openness. However, in order for substantive dividends to be realised from these reforms, the government needs to put less emphasis on the headline numbers and rather demonstrate patience, signal credibility and serious commitment to reform. These reforms need to be focused less on delivering immediate results and rather addressing structural constraints in Pakistan’s economy by reducing taxation costs and improving productivity and competitiveness.
For that, the government must appreciate the importance that stability and confidence plays in fostering a conducive investor climate and providing a fertile ground for export growth. But doing so requires clarity in communicating export promotion policy to investors and consistency in assuming ownership of policy that establishes trust across the business community that the government’s word holds serious weight.
The writer is a research fellow at the Strategic Trade and Economic Policy (STEP) Institute
Business
Hair oil, ACs, soaps become costlier: How FMCG companies are dealing with Middle East supply blow – The Times of India
Consumer goods companies in India are facing a sharp rise in input costs due to the ongoing war in the Middle East. Surging raw material prices are forcing firms to track costs on a near-daily basis, review pricing frequently, and focus on short-term decisions instead of long-term planning.As firms are struggling with volatile input costs, company executives have told ET that the sudden spike in inflation has made it harder to manage business, while also raising concerns that higher prices could hurt consumer demand. This comes at a time when consumption had started improving after the government reduced goods and services tax rates on several products last September.Havells India chief executive officer Anil Rai Gupta was cited by the financial agency as saying that the company is taking a cautious approach and reviewing the situation month by month. “I have not seen this kind of price escalation in the recent past or in recent memory. Usually, inflation happens, but it is neither so steep nor spread across all product categories… consumer offtake can get affected if the price hike is too sharp.” Bajaj Consumer Care managing director Naveen Pandey said the company is closely tracking input costs and taking decisions almost daily. Speaking during the company’s earnings call last week, he said costs across the business have gone up between 20% and 60%. He added that the war has created “extreme volatility” in the prices of light liquid paraffin and packaging materials. At the same time, prices of mustard and copra have not fallen as expected and are still at pre-war levels. The company is working on cutting costs across its operations.Industry executives said the war has pushed up commodity prices and crude-linked products, increased freight costs, and made imports more expensive due to the fall in rupee. They added that even after a ceasefire, prices have not come down, and uncertainty remains over whether the conflict could start again.In the past month, companies have already raised prices in several categories, including air-conditioners, refrigerators, soaps, detergents, hair oil, apparel, decorative paints and footwear. Some companies have also reduced pack sizes to deal with higher costs. More price hikes are expected by the end of this month.Parle Products vice president Mayank Shah said the pressure on input costs is very high and the uncertainty is “killing”.Retailers are also seeing more careful spending. Trent Ltd, which runs Westside and Zudio stores, said in an investor presentation that while demand was steady at the start of the January–March quarter, the current situation is affecting consumer behaviour.“Consumers are spending with caution, resulting in moderation of discretionary spending on the back of continuing macro uncertainties and potential increase in cost of living. Structurally the demand levels and the underlying market opportunities remain strong. However, the duration and intensity of disruptions in the Middle East along with its second order effect on supply chain, commodity prices and inflation in general has potential implications for near term demand,” the company said.AWL Agri Business executive deputy chairman Angshu Mallick said the company has already increased edible oil prices by Rs 7–10 per kg to pass on higher freight costs. “Being a staples company, we hike or reduce prices immediately. As we are in basic necessities, the volume impact is usually lower,” he said.Meanwhile, the Middle East conflict is inching closer towards the two month mark. The conflict began back on February 28, when the US and Israel launched joint strikes on Iran. In retaliation, Tehran choked the crucial Strait of Hormuz, a pipeline that carries 20% of global energy supplies, straining flow across the globe.
UK retail sales returned to growth last month as they were pushed higher by motorists stocking up on fuel as prices shot higher because of the Iran war, according to official figures.
The Office for National Statistics (ONS) said the total volume of retail sales, which measures the quantity bought, rose by 0.7% in March.
It compared with a 0.6% fall in February, which was revised slightly lower.
The latest reading was also stronger than expected, with economists having predicted a 0.1% dip for the month.
Statisticians said March’s increase was particularly driven by a spike in demand for fuel, which saw sales volumes jump by 6.1% for the month, the highest level since April 2021.
They indicated that this was especially linked to a short period, of less than a week, of particularly elevated sales as unfolding geopolitical events in the Middle East caused a significant rise in prices at the pump.
The value of sales, the amount of money spent, for fuel was up 11.6% amid the jump in petrol and diesel prices.
Recent data from the RAC shows that petrol prices have risen by 18.5% to 157.34 pence per litre, as recorded on Wednesday.
Meanwhile, diesel is up 33.4% to an average of 189.88 pence per litre.
Elsewhere, clothing stores also had a strong month, with sales volumes across the category rising by 1.2% in March amid a boost from better weather conditions.
Technology retailers also saw sales grow after they benefited from new products launches.
However, food sales were weaker, slipping by 0.8% for the month.
The ONS said overall retail sales volumes are up 1.6% for the first three months of 2026, as the industry was also supported by positive growth in January.
ONS senior statistician Hannah Finselbach said: “Retail sales rose in the three months to March, with commercial art galleries doing well earlier in the quarter and sales in beauty products stores rising as retailers reported launching new collections.
“Motor fuel sales were up on the quarter, with retailers commenting that many motorists had been filling up their tanks in March following the start of conflict in the Middle East.”
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said: “The first batch of hard data on consumers’ spending since the start of the Iran war was better than expected.
“Granted, stocking up on motor fuels drove headline sales higher, but even excluding petrol retail sales volumes nudged up showing that households largely brushed off the initial shock of higher energy prices.”
Oil prices rose on Friday morning over fears of renewed military escalation in the Middle East after Iran released footage of commandos boarding a cargo ship in the Strait of Hormuz and on reports that Tehran’s air defences had engaged “hostile targets”.
Brent crude futures rose $1.23, or 1.17%, to $106.3 a barrel, while West Texas Intermediate futures were up $1.07, or 1.12%, at $96.92.
Both benchmark contracts settled up more than 3% on Thursday and jumped $5 a barrel after reports that air defences were engaging targets over Tehran and of a power struggle between Iran’s hardliners and moderates.
US President Donald Trump said that Iran may have loaded up its weaponry “a little bit” during the two-week ceasefire, but added that the U.S. military could eliminate it in just a single day.
The ceasefire phase is increasingly looking like a preparatory phase for war, Haitong Futures said in a report.
If US-Iran talks fail to make key progress by the end of April and fighting resumes, oil prices could climb to new highs for the year, it added.
Iran on Thursday posted video of commandos in a speedboat storming a huge cargo ship after the collapse of peace talks, underlining its grip over the Strait of Hormuz through which 20% of global oil and gas usually flows.
As investors and governments around the world look for an enduring peace, Trump said he would not set a “timetable” for ending the conflict with Iran and that he wanted to make “a great deal.”
“Don’t rush me,” he said when asked how long he was willing to wait for a long-term peace deal with Iran.
Prolonged disruptions in the Strait of Hormuz could push global crude and refined-product inventories below five-year seasonal lows by late May or early June, adding a supply-risk premium back into oil prices, said Mingyu Gao, chief researcher for energy and chemicals at China Futures.
Trump also announced in a social media post on Thursday that Israel and Lebanon had agreed to extend their ceasefire by three weeks after a high-level meeting between representatives of both countries in the White House Oval Office.
Before that announcement, Israel warned that it was ready to restart attacks on Iran.
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