Page 35 - CMA Journal (Sep-Oct 2025)

Focus Section

Trade Reforms to Boost Pakistan’s

Industrial and Economic Growth

Rationale for Trade and Tariff Reforms This approach favored
consumer product indu-
Pakistan can unlock its actual industrial potential and stries through relatively
sustainable development growth if it focuses on trade
higher tariffs, while
and tariff reforms 2025-2030. It took almost three
capital goods and inter-
decades for Pakistan to recognize the importance of
mediate goods sectors
effective reforms in its fiscal budget for 2025-2026. The Dr. Abubakar Khaliq
country needs to shift from an import-oriented economy lagged behind. In the Faculty Member at
to an export-oriented economy. These reforms in trade 1970s, Pakistan revised SZABIST University and
policies were essential to achieve overall sustainability, tariffs to upgrade its Research Assistant at COMSATS
economic development, and growth. An adverse balance industrial base and University, Islamabad
of payments and low foreign exchange reserves have enhance global econo-
been the main factors affecting the economy. These mic connectivity (Ur Rehman, 2023). As a result of
factors have left Pakistan in a vulnerable state, increasing liberalization, domestic industries faced increased
reliance on imports and loans from global financial competition. However, major industries such as food,
institutions, the World Bank, and the IMF. textiles, leather, paper, and petroleum were shielded
through tariff escalation. In the 2000s, Pakistan exempted
According to Delechat et al. (2024), rapid shifts in global
trade and tariff mechanisms and policies have created the the textile sector from sales tax and allowed the import of
need for reforms in the current trade and tariff policies. supplies free from both sales tax and tariffs. Historical
Sudden modernization of industrial sectors and rapid evidence indicates that Pakistan has employed a wide
economic diversification have made it increasingly range of trade policies and structures in pursuit of
difficult for economies to achieve their development sustainable development growth.
goals. Although different economies are making flexible
modifications in their policies to enhance economic Key Challenges in Trade and Tariff Reform
development, Pakistan should implement similar reforms
to improve the tariff system, increase overall transparency, Reforming and implementing trade and tariff policies
and foster a more export-oriented environment (Mufti &
remain significant obstacles to the country’s sustainable
Ali, 2024). There is a clear need for a strategic change in economic development. Current trade and tariff policies
trade and tariff policies to make them more sustainable
are not yet efficient enough to achieve long-term
and efficient for long-term industrial growth.
development goals, which hinders overall economic
Historical Overview growth. Although Pakistan has modified its policies over
the years, it has still struggled to achieve sustainable
In response to India’s 1948 trade restrictions against
development growth. The country’s heavy reliance on
Pakistan, the first industrial plan was introduced. Through tariffs has contributed to a predominantly import-
protectionism, trade barriers, an overvalued exchange
oriented economy. Another major challenge is limited
rate, and subsidized industrial loans, it focused on the global integration, with minimal participation in global
development of fundamental industries. Pakistan adopt-
value chains, restricting foreign exchange inflows.
ed an import-substitution industrialization strategy in the
1960s.
ICMA’s Chartered Management Accountant, Sep-Oct 2025 33