EDITORIAL: The State Bank of Pakistan (SBP) has released remittance data for July-January 2025-26 that shows nearly an 11 percent rise compared to the same period the year before — USD 23,201.6 million against USD 20,850 million in total terms. Remittance inflows and exports are two of the desired forms of earning foreign exchange, and a rise in any of the two reduces the need for external borrowing to meet the trade deficit and to support for the local currency. Pakistan has long experienced a boom-bust cycle defined as per the 10 October 2024 International Monetary Fund documents released after the approval of the ongoing USD 7 billion Extended Fund Facility (EFF) as follows: “Economic volatility has only increased over time, with a tight correlation between Pakistan’s boom-bust economic outcomes and its macroeconomic policies. The repeated attempts to boost economic activity through fiscal and monetary stimulus have not translated into durable growth, as domestic demand increased beyond Pakistan’s sustainable capacity, resulting in inflation and depletion of reserves, given a strong political preference for stable exchange rates. Each subsequent bust has further harmed Pakistan’s policymaking credibility and investment sentiment.” The present government pledged to break this cycle though it initially adopted the same methodology as during previous cycles notably seeking IMF support for the deteriorating balance of payments position, imposing administrative measures (limiting opening of letters of credit), though recent trade deficit indicates a surge in the deficit with exports USD 18.195 million (registering a 7.09 percent decline year-on-year) and imports at USD 40.233 million (indicative of a 9.4 percent increase year-on-year). Against this disturbing background, Prime Minister Shehbaz Sharif announced a set of incentives for industry, including a reduction in the electricity tariffs by 4.04 rupees per unit by ending the cross-subsidy payable by industry, wheeling charges to less than 9 rupees, release of a subsidy from the export development fund to rice exporters and a reduction on the export refinance scheme rate from 7.5 percent to 4.5 percent (amounting to 1052 billion rupees out of which 900 billion rupees had already been utilised). These incentives are at the cost of the taxpayers and, if not already secured, would require approval by the IMF team under the EFF. Business Recorder has already sought clarity as to the source of funds for these incentives and the cost to be paid by the taxpayers. The business community, in spite of these incentives, continues to express serious concerns over higher input costs facing local industry compared to their regional competitors; notably, India and China. They point to the 10.5 percent discount rate that compares unfavourably with India’s 5.25 percent and China’s 2.9 percent, and the pledge to the IMF to achieve full-cost recovery in utilities the administration has relied on borrowing from commercial banks (1.25 trillion rupees) to retire the circular debt procured at a much higher rate of interest than is applicable today, and with the reliance on petroleum levy rising to meet the government’s revenue requirements transport costs for both goods and people have been rising. In other words, while the incentives to industry, which may be challenged by the Fund team as and when the third review talks begin in the coming days, the disparity in input costs with regional competitors remains, making our exports uncompetitive in world markets. And if one considers the recent India-European Union free trade deal (effective from next year which will take away the advantage of the GSP+ status enjoyed by Pakistani exporters) and the US decision to reduce tariffs on Indian goods to 18 percent against 19 percent applicable on Pakistani goods there is a need for an urgent revisit to our industrial strategy that remains mired in extending monetary and fiscal incentives to existing industry – policies which the IMF notes has kept our industry at the “infant” stage. Copyright Business Recorder, 2026