Short News

The recently finalised EU–India Free Trade Agreement (FTA), described by Brussels as “the mother of all agreements”, is a crucial development that should prompt Pakistan to reassess its export strategy. The European Union or EU is not just another market for Pakistan; it is the cornerstone of the country’s export economy. Approximately 40pc of Pakistan’s exports head to the EU, with textiles and clothing representing nearly 76pc of those exports in 2024. This heavy concentration on a single market and product category brings both advantages and risks. On one hand, European demand has traditionally been stable, and the Generalised Scheme of Preferences Plus (GSP+) has provided Pakistani exporters with sustained market access for value-added textiles. On the other hand, such reliance makes Pakistan highly vulnerable. Any reduction in competitiveness — whether through tariffs or non-tariff barriers — can quickly lead to lost orders, idle factories, job losses, and increased pressure on...

In an economy scarred by one crisis after another, Pakistan’s banking sector has been a notable exception even as others struggled. With interest rates peaking at 22 per cent two years ago, sustained government borrowing allowed the sector to lock in high returns by parking liquidity in fixed Pakistan International Bonds (PIBs), earning bumper profits with minimal balance sheet risk. However, the past is another country, and now things seem to be returning towards normalcy — whatever that means in Pakistan’s context. For the most part, monetary policy has already been eased as the key rates have reverted towards their long-term (20-year) average of 10.35pc, naturally raising expectations that it would revive private sector activity. Unfortunately, the data is troubling as private sector credit becomes increasingly divergent from the broader monetary cycle, reflecting structural incentives that favour the deployment of liquidity into government securities rather than lending to the re...