Exports on life support

Export Vision & Reality
With a five-year plan to double exports, Pakistan finally has the chance to narrow the gap with its peers. Fresh trade deals have given Pakistan a tariff advantage, turning long-standing hurdles into a rare opening for exporters to claw back global market share.

But the path ahead is strewn with obstacles. Energy costs are punishing—Pakistan’s electricity tariffs rank among the highest in the region, eroding any gains from tariff relief abroad. Once-busy factories now run at half-steam or one third capacity, choked by gas shortages and even water scarcity in some areas. Add to that the drag of weak global demand and the weight of US tariffs, and exporters find their runway shrinking fast—dreams of expansion look increasingly unrealistic.

Rains have struck hard, but policy has failed harder. Five years on, Pakistan has done little to counter climate change, and the cost is now evident. Torrential rains and floods have crippled major manufacturing hubs and threaten core crops—rice, sugarcane, cotton—the backbone of our exports. Ambition is meaningless without a plan, and the government will have to dig deeper than just do wishful thinking.

IMF Flags Lack of Reforms
Pakistan has achieved notable gains with its first current account surplus since 2011 and the largest primary balance surplus in two decades, aided by lower inflation, interest rates, and currency stability. However, the IMF warns these improvements are fragile without bold reforms and stresses:

– Stalled structural reforms in taxation, privatization, and energy
– Low reserves (~2.5 months import cover)
– Climate shocks with flooding and crop risks

The FX Effect
Even currency movements are working against exporters. The rupee has firmed to 281.90/$, with analysts expecting more gains ahead. It’s a paradox: on the ground, physical dollars remain scarce, yet policy is steering the currency stronger—an odd choice when the stated goal is to boost exports, increase industrialisation, and discourage imports.

Interest Rate Cut
Caution won’t cut it—Pakistan needs growth. With real interest rates already high, even on a forward-looking basis, the case for deeper easing is clear. We expect the SBP to move with a 100 bps cut at the next MPC, in step with global monetary easing—especially with the Fed poised to cut rates by 25 bps on Sep 18.

Fed Chair Powell Pivots to Cutting Mode
– Market expectations: A clear swing toward aggressive rate cuts, possibly totaling four, driven by Powell’s dovish shift.
– Investor response: Broad-based rally and bond-market dovish pricing firmly in place.
– Fed posture: No grand commitment to easing yet—just an openness dependent on incoming data and labor market weakness.

Projections:
• 1 Week: 281.60
• 1 Month: 280.50
• 1 Quarter: 283.00
EUR/USD
• 1 Week: 1.1522 (Bearish)
• 1 Month: 1.1625 (Bearish)
• 1 Quarter: 1.1779 (Sideways)
GBP/USD
• 1 Week: 1.3407 (Bearish)
• 1 Month: 1.3571 (Sideways)
• 1 Quarter: 1.3741 (Bullish)
USD/JPY
• 1 Week: 148.5 (Bullish)
• 1 Month: 145.04 (Bearish)
• 1 Quarter: 142.71 (Bearish)
Oil WTI
• 1 Week: 64.12 (Bullish)
• 1 Month: 66.25 (Bullish)
• 1 Quarter: 66.14 (Bullish)
Gold
• 1 Week: 3316.67 (Bearish)
• 1 Month: 3405 (Sideways)
• 1 Quarter: 3494.29 (Bullish)