Page 34 - CMA Journal (Mar-Apr 2026)

n Sri Lanka's export base has developed a more balanced 3) US-Pakistan Tariff Barriers: In 2024, when the US
approach. Textiles are still a major portion of its introduced its reciprocal tariffs policy, Pakistan was
economy, like its other South Asian peers, but the charged with a tariff rate of 29%. Initially, Pakistan tried
country has developed a more niche base for branded to correct the balance of trade by increasing its imports
apparel. Its export-to-GDP ratio is one of the highest in from the US. Later, the rate was re-negotiated and
the region. reduced to 19% by the US. This exchange highlighted
how dependent Pakistan's economy is on preferential
While some countries succeed through specialization and
treatment and diplomatic relations.
others through diversi cation, Pakistan has yet to achieve
either effectively. Its vulnerability to shocks is deep rooted in 4) Red Sea and Suez Canal Disruptions: The political
its trade structure. tensions in the Red Sea area in 2023 led to many
challenges for global shipping and maritime channels.
Trade Vulnerability Cycle
Reports from UNCTAD state that the disruptions in the
Red Sea and the Suez Canal resulted in a reduction of
transit by more than 40% during peak times. These
disruptions impacted transport costs as well as
insurance charges for freight globally. Over 90% of
Pakistan's trade is seaborne so this immediately
impacted the costs, disproportionately affecting
Pakistani exporters especially ones in the textiles
industry.

Adapting to Disruption

Over the years, the government of Pakistan has proposed
various short-term measures as well as long-term policies.
These policies have had varying degrees of effectiveness.
Case Studies: Impact of Global Shocks
The COVID-19 period led to various export facilitation
packages, including subsidized energy tariffs, concessional
1) COVID-19 and Russia-Ukraine War Disruptions:
nancing, and tax rebates.
Geopolitical disruptions like the COVID-19 pandemic
and Russia-Ukraine escalations almost immediately The State Bank of Pakistan (SBP) expanded various nancing
impacted the global supply chain, delaying imports and schemes:
exacerbating the costs for raw materials. These
n Temporary Economic Refinance Facility (TERF)
disruptions triggered a sharp increase in global energy
and raw material prices. At the same time, Pakistan n Export Finance Scheme (EFS)
faced a foreign exchange crisis, which restricted the
n Export Import (EXIM) Bank
import of essential inputs such as cotton, dyes, and
machinery. These directly affected Pakistan's largest These initiatives helped rms maintain operations and invest
export sector, and many textile units were forced to in capacity despite rising costs.
operate below capacity, some textile mills were
operating below 50% capacity after failing to secure Initiatives like URAAN Pakistan (2024–29) were also introduced,
which aimed to:
Letters of Credit.
n Promote export diversification
2) Demand Shocks in Export Markets: Pakistan's export n Encourage value addition
portfolio has traditionally been very limited, but so has
its range of destination markets. The exports have n Expand IT and non-textile sectors
mainly been concentrated in countries such as the US,
In the wake of an energy crisis, the government tried to
UK, Germany, and Spain, showing a lack of geographic
ensure competitively low energy prices for the textile
diversi cation in its already inadequate export portfolio.
industry. However, scal constraints and IMF conditions
This lack of diversi ed consumer base causes instability
made such measures unsustainable. This forced withdrawal
and major uctuations in exports, highlighting over-
of many policies and created uncertainty for exporters.
dependence on cyclical demand rather than secure and
well-established markets.
32 ICMA’s Chartered Management Accountant, Mar-Apr 2026