By Muhammad Ali Akbar Popalzai:

The economy of Pakistan has been facing continuous pressure because of the constant supply chain breakdowns and strict quotas on imports, which influence industrial productivity, inflation, and general economic stability. All of these are caused by a complex of various global uncertainties, domestic policy limitations, and structural failures of logistics and trade systems of the country.

In recent years, the world supply chains have been more severely affected than ever before due to the geopolitical tensions and conflicts affecting major trading routes, as well as, the residual nature of the COVID-19 outbreak. These external shocks, especially the reliance of Pakistan on imported raw materials, machinery, fuel, and intermediate goods have made it especially susceptible. Shipment delays, increased freight costs and lower access to strategic inputs have had a direct effect on manufacturing time lines and expenses.

The restriction of importations at the domestic level was implemented mainly to save foreign exchange resources and control the increasing negative balance of trade. Letter of credit (LC) controls, prioritisation of necessities imports and temporary restrictions on some commodities were supposed to stabilise the balance of payment. Automobile, pharmaceutical, textile, and electronics industries, which are dependent on imports, have recorded reduced production.

One of the worst hit sectors has been the large scale manufacturing sector. The lack of raw materials and spare parts affected the production cycles and resulted in low output and loss of jobs. The export oriented industries, though earning foreign exchange, also had a hard time because of the delay in importation of intermediate products, thus affecting the competitiveness of Pakistani exports in the global market.

These disruptions have not spared consumers. Limited imports and increased logistics expenses have led to shortages of some goods and increased prices to add to inflationary pressures already caused by the costs of energy and currency depreciation. With supply being constrained, the businesses are able to transfer the increased costs to the consumers which reduce their purchasing power and reduce their standards of living.

In addition, inefficient supply chains are a permanent problem that points to more structural problems. The logistic infrastructure in Pakistan is still a major bottleneck, which is characterised by high transportation costs, poor warehousing facilities and multimodal connectivity. Such weaknesses not only lengthen the lead times but also enhance resilience of the supply chains hence the economy is prone to internal and external shocks.

Although the import restrictions can give temporary relief to the foreign exchange reserves, economists believe that it is not a long term remedy. The long-term limitations may lead to discouragement of investment, to the encouragement of informal trade routes, and to the decline of industry.

Enhancing domestic supply chains, enhancing port and transport infrastructure, diversifying the import sources and promoting local production of intermediate products are all the essential steps of improvement. A balanced and predictable trade policy environment in which businesses can also plan efficiently is also important.

Finally, a case in point is disruption of supply chain and importation in Pakistan, which indicates that radical changes in the economic and trade framework are much needed. This will be necessary in order to stabilise growth, manage inflation, and increase competitiveness of the country in the global economy by going beyond the reactive measures to long-term resilience.