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