The recent announcement by Prime Minister Shehbaz Sharif of a relief package for Pakistan’s struggling industrial sector has been welcomed as a timely intervention. With producers weighed down by soaring energy costs, expensive financing, and a heavy tax burden, the measures are designed to ease immediate pressures, stimulate productivity, and strengthen the competitiveness of exports. In the current global environment, where competition is intensifying and trade dynamics are shifting rapidly, such steps were necessary to prevent further erosion of Pakistan’s market share.

The urgency of action was underscored by India’s free trade agreement with the European Union, which threatens to dilute Pakistan’s preferential access to European markets. To counter this, the government moved quickly to provide exporters with cost relief. The package includes a reduction of Rs4.04 per unit in electricity tariffs, a cut in wheeling charges to below Rs9 per unit, and a decrease in the cost of export refinance from 7.5 percent to 4.5 percent. These measures, welcomed by the business community, are expected to provide breathing space to industries struggling to remain competitive.

Yet, while the relief is significant, questions remain about its overall size and the government’s strategy to offset the revenue shortfall. It is unclear whether the financial gap will be absorbed through the budget or passed on to other consumers. This uncertainty highlights the challenge of balancing short-term support with fiscal discipline. The announcement also came soon after the State Bank’s decision to lower the cash reserve requirement for banks, injecting liquidity into the system to encourage private sector credit growth. Together, these moves signal a shift in policy direction from stabilisation towards growth.

However, the effectiveness of the relief is undermined by mixed signals from the state. Even as industry welcomed the package, foreign investors expressed concern over demand notices issued by the Federal Board of Revenue for payment of the super tax, following a court ruling upholding its legality. Such developments reinforce the reality that subsidies alone cannot substitute for long-overdue structural reforms aimed at improving the investment climate and export competitiveness.

Experience has shown that subsidised energy and credit, while offering temporary relief, do not resolve deeper weaknesses. Productivity remains low, regulatory unpredictability persists, taxation is heavy, contract enforcement is weak, and the export base is narrow both in terms of products and markets. Symbolic gestures, such as special passports for exporters, may provide recognition but cannot address these fundamental challenges. Subsidies, in effect, compensate businesses for inefficiencies rather than incentivising innovation or sustainable growth.

As the government reorients its economic policy towards growth, caution is essential. A premature or poorly coordinated stimulus could undermine the fragile macroeconomic stability achieved with difficulty in recent years. Pakistan’s path to sustainable growth depends on expanding exports and attracting foreign private investment that does not add to the debt burden. These objectives cannot be achieved through ad hoc measures. They require comprehensive reforms in policy and governance that create a predictable, transparent, and supportive environment for business. Relief packages may provide short-term respite, but long-term prosperity will only come through reforms that strengthen the foundations of the economy.