Pakistan is preparing its next Strategic Trade Policy Framework for 2026-31 as it seeks to convert renewed macroeconomic stability into sustained, export-led growth. With the framework expected to advance an 'export-first policy' orientation, the challenge is to strengthen exports without allowing import demand to recreate the external imbalances of previous economic cycles. This requires distinguishing consumption imports from the machinery, raw materials, components and technology that build productive capacity, domestic value addition and export competitiveness.
The latest data illustrate this balance. Pakistan's current-account deficit narrowed from $814 million in June to $328 million in July. The improvement is encouraging, but it was supported substantially by $3.63 billion in workers' remittances.
Goods exports were approximately $3 billion, imports exceeded $6 billion and the goods-and-services deficit remained around $3.37 billion. Customs data present a similar picture. Exports rose 10.4% year-on-year in July, while imports rose 18.9%, producing a merchandise trade deficit of almost $4 billion.
The concern is that faster import growth could widen external financing requirements. But aggregate figures do not reveal the economic purpose of imports. Machinery that raises productivity, raw cotton processed into exported garments, chemicals used by pharmaceutical firms and components incorporated into engineering products differ from finished consumption goods.
Some of July's import growth came from electrical machinery, metals and industrial inputs. These immediately increase foreign-exchange demand but may also support investment, production and future exports. The relevant question is therefore how to facilitate imports that build productive capability while managing those that primarily add to consumption and external pressure.
Pakistan's trade-policy framework has lately recognised much of this relationship. The Strategic Trade Policy Framework 2020-25 explicitly identified high tariffs on primary and intermediate inputs as a constraint on export competitiveness. It also acknowledged that the longstanding use of tariffs primarily as revenue instruments, rather than tools of trade and industrial policy, had created distortions and reinforced an anti-export bias.
The framework called for duty-free access to imported inputs, internationally competitive input prices, tariff rationalisation and removal of anomalies across manufacturing value chains. It proposed simpler, more automated duty drawback, better mapping of import and export procedures, periodic rationalisation of the Import and Export Policy Orders and integration with the Pakistan Single Window. One of its most important observations concerned practical access.
Only around 5% to 6% of exporters were using export-facilitation schemes because compliance was difficult. STPF 2020-25 sought to raise utilisation to 50% by 2024-25, particularly among SMEs. The next stage of reform can build on this diagnosis by making existing facilities simpler, more predictable and more widely usable.
The National Tariff Policy 2025-30 provides an important foundation. It proposes eliminating Additional Customs Duties within four years and Regulatory Duties within five, reducing the trade-weighted tariff to below 6%, simplifying tariff slabs and moving concessions from the Fifth Schedule into a more transparent structure. Consistent implementation would reduce production costs and dependence on firm-specific concessions.
Tariff reform alone, however, cannot address every constraint. Exporters also need clear contracting and payment routes, efficient warehousing, predictable foreign-exchange treatment and workable arrangements for temporary, returnable and free-of-cost imports. Bangladesh's new Import Policy Order offers a timely peer example.
Issued on August 24, it removes the previous general monetary ceiling for industrial and commercial imports conducted without letters of credit through sales or purchase contracts. Under the previous framework, commercial imports through this route were generally capped at $500,000 annually. The order does not remove banking, foreign-exchange or regulatory oversight.
Instead, it gives businesses greater flexibility in selecting a transaction structure recognised by the authorities. It also expands free-of-cost facilities for export-oriented manufacturers, covering specified samples, production inputs, specialised machinery parts and certain safety and compliance equipment supplied without direct overseas payment by the importer. Bangladesh has also introduced explicit provisions for free trade zones and central bonded warehouses, facilitated imports of machinery and inputs for approved industrial investments by expatriate Bangladeshis and incorporated authorised economic operators and preferential trade arrangements into the framework.