Export Growth Needs Market Liberalization, Not Sub...

Summary

• Removing these distortions could raise domestic production by 2.4 per cent and exports by 4.9 per cent annually, while also generating additional tax revenue of Rs278 billion over time.
• Textiles and apparel, which account for 55–60 per cent of merchandise exports, reached about $18 billion in FY2025-26.
• Yet overall merchandise exports still declined 5.9 per cent to $30.14 billion in the same period.

AI Generated Summary

By Dr. Abedullah[1]

Author is formal Chief of Research at Pakistan Institute of Development Economics, Pakistan and can be reached at abedullahanjum@gmail.com

Pakistan has spent decades trying to boost exports through subsidies. The results have been disappointing. Large amounts of public money have been spent on rebate schemes, yet exports remain stuck in a narrow range while the fiscal burden continues to grow. Real and lasting export growth requires market liberalization that reduces costs and pushes firms to compete on efficiency and quality, rather than on government support.

Evidence from Pakistan’s own experience is telling. A World Bank study of the Duty Drawback of Taxes scheme for textiles found only a limited impact on overall exports. For every dollar spent on the scheme, just $1.1 in additional exports was generated. Much of the effect came from shifting sales toward products that received higher rebates, rather than expanding the total volume of exports. Between 2017 and 2020, the scheme absorbed roughly one per cent of the federal budget without delivering significant growth.

Wider research points in the same direction. The Pakistan Institute of Development Economics estimates that tariffs and export subsidies together cost the economy about Rs1.67 trillion a year through inefficient allocation of resources. Removing these distortions could raise domestic production by 2.4 per cent and exports by 4.9 per cent annually, while also generating additional tax revenue of Rs278 billion over time.