These are turbulent times for global trade. India and Pakistan are struggling with rising tensions due to the Pahalgam attack; the Middle East crisis following Israel an d Gaza is growing increasingly complex; and the Russia-Ukraine war continues unabated. Meanwhile, Iran has yet to finalise a nuclear deal with the United States, amid threats of force from President Donald Trump in the event of failure. President Trump`s tariff war with China also remains unresolved, as do his trade disputes with several other nations.

The situation is challenging, especially for Pakistan, where an economic recovery has only just begun and lacks sustainable improvements in the external sector.

Continuation of this recovery hinges on a favourable geopolitical environment.

Pakistan`s recent external economic gains have largely depended on remittances from overseas Pakistanis, particularly those residing in Gulf Cooperation Council (GCC) countries and the United States.

While an adverse geopolitical environment may have a moderately negative impact on remittance inflows, it could have a more severe and lasting effect on potential foreign direct investment (FDI). Global trade is already becoming more expensive, with import costs rising and net export earnings taking a hit due to increased shipping and container charges. In this context,it is essential for Pakistan to secure some tariff concessions from the US before the Trump administration finalises new average tariffs for the country.

Pakistan`s exports remain heavily reliant on food items for overall growth, as the textile sector continues to struggle mirroring the difficulties faced by other largescale manufacturing industries.

Meanwhile, the government`s Green Pakistan Initiative (GPI) aims to revolutionise the agriculture sector and sustain the momentum in food exports.

However, making the GPI a genuinesuccess requires greater interprovincial harmony on critical issues such as water sharing, the unrestricted movement of final commodities across provincial borders and equal treatment of all federating units by the federal government. It is encouraging to note that Prime Minister Shahbaz Sharif and PPP Chairman Bilawal Bhutto Zardari have finally agreed to resolve the ongoing dispute over canal construction onthe Indus River amicably. A meeting of the Inter-Provincial Coordination Council has been convened to address this matter.

Under the current geopolitical situation, Pakistan`s economic managers must focus on a few critical priorities simultaneously and with full vigour. The first is the stability of the external account. If tensions escalate, maintaining sufficient foreign exchange reserves and ensuring the stability of the rupee will become vital.

The second priority closely tied to the first is the need to boost exports, remittances, and foreign investment. Realisingthe promised inflow of significant FDI from GCC countries in the near future will require making some tough trade-offs, even if the current tensions die down. In this context, building a genuine national consensus on policies aimed at attracting FDI in politically sensitive sectors such as mines and minerals, agriculture, and energy becomes urgently important.

Containing imports through tariff or non-tariff measures remains off the table, as Pakistan is still under an International Monetary Fund lending programme.

However, a greater focus on agricultural and industrial development to encourage import substitution is both feasible and urgently needed.

In 9MFY25 of the current fiscal year (July 2024 to March 2025), Pakistan`s goods export earnings rose 7.82 per cent year-on-year to $24.72 billion, while imports grew 6.6pc to $42.69bn, according to the Pakistan Bureau of Statistics. Unless export growth consistently outpaces import growth, managing the trade deficit will become increasingly difficult especially given the rupee`s vulnerability. The currency has already come under pressure amid fears of a military clash with India.

Of the $24.7bn in exports during this nine-month period, food exports accounted for $5.75bn -more than 23pc. For a country of 245 million people, such a high share of food in total goods exports is concerning, as it risks exacerbating domestic food shortages and fuelling food inflation.

Moreover, Pakistan must also seek new export markets and deepen its presence in existing ones. It should particularly enhance food trade with neighbouring countries such as Iran, Afghanistan, and China and explore greater opportunities in South and East Asia. •