LAHORE: Pakistan’s economic planners have remained undeterred by the disruption caused by former US President Donald Trump’s trade policies, continuing with key initiatives as scheduled. The government held an investors’ conference on mineral resources and commenced the Overseas Pakistanis Conference on time, while the prime minister has proceeded with his planned foreign visits.
The global economy has witnessed considerable upheaval, largely due to Trump-era trade policies that disrupted long-standing norms — from the US-China trade war to tariffs imposed on traditional allies. In response, many countries have recalibrated their trade, industrial and investment policies to shield themselves from such external shocks.
Pakistan faces even greater challenges than many of its peer economies. The country was on a slow path to economic recovery when global trade was disrupted. It urgently requires both foreign and domestic investment across multiple sectors. At the same time, the government needs to significantly increase tax revenues to bridge its fiscal deficit. Enhancing exports while curbing imports is critical — but the imposition of new tariffs has cast doubt over the recent upward trend in exports. These disruptions are also likely to reduce revenues and put further pressure on the Pakistani rupee.
Nevertheless, the country’s planners have remained focused. They went ahead with the investors’ conference to promote opportunities in Pakistan’s mineral-rich regions, despite rising security concerns in resource-heavy provinces such as Khyber Pakhtunkhwa (KP) and Balochistan. The government appears to have reassured investors about the safety of their ventures, and all provinces are reportedly on board to approve a unified legal framework governing natural resources. These steps signal a long-term strategy aimed at resource mobilisation and investor confidence-building.
However, domestic investors remain wary, and foreign direct investment continues to lag due to political and security concerns. Without addressing these core issues, such efforts may yield only limited results.
The prime minister’s foreign visits can play a useful role in diplomacy and economic engagement — particularly in improving trade access, securing investment and boosting remittances. However, such trips must be well-targeted and followed by meaningful policy facilitation at home.
Overseas Pakistanis send more than $30 billion in remittances each year, making their engagement crucial. Yet the real challenge lies in channelling these funds into productive sectors — beyond real estate and consumption. In FY23, Pakistan received $30 billion in remittances, but only 2-4 per cent is estimated to have been invested in industrial or service-sector ventures. The majority — over 80 per cent — is used for daily expenses and real estate.
Major deterrents to productive investment by overseas Pakistanis include lack of trust, bureaucratic hurdles, security concerns and inefficient dispute resolution mechanisms. The ongoing conference must address these issues head-on. Policymakers would do well to examine how the Indian diaspora has played a transformative role in India’s economic rise.
India received $125 billion in remittances in 2023 — the highest globally. Of that, an estimated 15-20 per cent was invested in productive sectors such as industry, services, small businesses, and startups. Programmes like Startup India, investment incentives for non-resident Indians (NRIs), and diaspora bonds have helped channel these funds into growth-oriented avenues. Many NRIs have invested in technology, education, healthcare, hospitality, and even venture capital.
Another hurdle for Pakistani policymakers is resistance from the local business community, often in response to efforts around documentation, taxation and subsidy reform. While reforms that improve transparency, ease of doing business and foster fair competition should be implemented, engaging in meaningful consultation is essential to avoid backlash and prevent reform paralysis.
