Pakistan’s economic growth is slow, and with a budget that relies heavily on taxation for net revenue, the country is in a tight economic situation. However, there are promising indicators. For instance, the trade deficit with Middle Eastern countries has decreased, meaning Pakistan has exported more and imported less. The growing market for Pakistani products in the Middle East helps offset the trade challenges with neighboring countries due to strained security relations.
Much of the credit goes to the free trade agreement that Pakistan entered into with Gulf countries, expanding the market for Pakistani goods. A 46% increase in exports indicates that we are headed in the right direction, and economic diplomacy with nearby Asian countries is yielding benefits. The Middle East has always been a significant partner bloc for Pakistan due to religious ties and prioritization of these relations.
The free trade agreements are mutually beneficial, as the business community profits from exporting goods, and Pakistan’s net earnings increase. While the tax burden is heavy, the reduction in the trade deficit and increase in exports will help alleviate the revenue pressure on the tax sector. Pakistan should consider entering into more FTAs with other Middle Eastern countries with substantial trade volumes. The Gulf is an attractive market for Pakistani products, given the relatively low transit costs.
Amid tight fiscal constraints, bilateral economic relations provide Pakistan with a crucial breathing space. A viable stability plan should aim to enhance this breathing space further. Over time, other economic indicators will also improve, and the burden of taxation and inflation will ease.