The upside (why markets cheer)
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Currency stability: FX inflows smooth volatility.
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Reserve cover: Improves import financing and debt optics.
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Household resilience: Rural incomes (KP, Punjab) see material support.
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Counter-cyclical buffer: Remittances often rise when domestic growth falters.
The risk (why economists worry)
Remittances can plug the current-account gap, but they can also delay hard reforms:
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Trade policy inertia: High tariffs and para-tariffs protect inefficient sectors.
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Export concentration: Low value-added goods dominate; diversification stalls.
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Manufacturing stagnation: Imports rose ~8% YoY while output lagged—masking competitiveness gaps.
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Chronic imbalance: Pakistan has lived with a 5–7% of GDP trade gap for much of the past decade.
Bottom line: Remittances stabilize the present but can postpone the future if treated as a substitute for export competitiveness.
What “trade reform” actually means (plain English)
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Tariff rationalization: Cut cascading duties that tax exporters’ inputs.
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Export diversification: Move beyond textiles into engineering goods, agri-processing, IT services.
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Logistics & energy costs: Fix ports, customs, and power pricing that erode margins.
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FX neutrality: Reduce multiple-rate distortions that penalize exporters.
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Firm-level productivity: Skills, technology adoption, and scale incentives.
These are painful—but unavoidable.
How Pakistan compares with India
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Scale: India consistently leads the world with $110–125 bn+ annually, dwarfing Pakistan’s totals.
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Composition: India pairs remittances with robust services exports (IT, business services), reducing dependence risk.
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Policy lesson: Remittances work best alongside export growth—not instead of it.
