Pakistan’s $55 Billion Addiction

Pakistan’s import bill has become more than just a number on the balance of payments, it is a recurring crisis that keeps the economy permanently on edge. Look at the trajectory: we imported $44.6 billion worth of goods in FY2020, saw that climb to $56.38 billion in FY2021, then hit a staggering $80.14 billion in FY2022. The bill finally collapsed to $55.2 billion in FY2023, not because we fixed anything, but because the government slapped on administrative restrictions and the rupee went into freefall. By FY2024, it had settled at $54.8 billion. That rollercoaster: driven by global commodity prices, a volatile exchange rate and knee-jerk import bans, highlights the structural weaknesses in Pakistan’s import management. The structure remains highly import-dependent and vulnerable to external shocks. Cutting imports is not about more bans or austerity. It requires a precise, evidence-based strategy that goes after the three pillars of our import dependency: energy, food and industrial inputs.

The composition of that $54.8 billion bill is where the real problem lies. Petroleum products and crude oil alone swallowed over $12 billion. Liquefied natural gas added another $3.9 billion. Then there is palm oil at $2.8 billion, wheat at $1 billion and machinery at $6.7 billion. We are importing fuel to keep the lights on, food to feed a population of roughly 240 million people and machines to keep factories running. The question is not whether we need these imports; we clearly do. The question is whether we can reduce them through structural reform instead of administrative import controls.

Energy is the single biggest drain and it is also where the most meaningful savings lie. The IMF has been saying this for years, across multiple Article IV consultations and Stand-By Arrangement reviews: Pakistan must move away from imported furnace oil and LNG toward indigenous and renewable sources. The cost of not doing so is visible in the power sector’s circular debt, which has now ballooned to roughly Rs 2.4 trillion, about 2.3 percent of GDP, according to the Ministry of Finance and Power Division. That debt is fed partly by the widening mismatch between what we pay for imported fuel and what regulators allow utilities to charge.

Tariff adjustments alone will not fix this. What we need is a genuine energy transition. The World Bank and IRENA have both documented Pakistan’s extraordinary solar potential, particularly in Balochistan and Sindh, where solar irradiation is among the highest in the world. If we scaled up investment in solar, wind and Thar coal, we could directly displace billions of dollars in LNG and furnace oil imports. The exact savings would depend on how fast we move and where global energy prices head, but the direction is unmistakable. The problem is that the government keeps talking about renewable energy without creating the bankable projects or sovereign guarantees that would bring in serious private investment. Policy announcements must now be matched by credible implementation.

Food imports are the second pressure point. Last year, we spent $2.8 billion on palm oil, $1 billion on wheat, and $775 million on pulses. These are not luxury items. They are staples for a country whose population crossed 240 million in the 2023 census. Yet here is the paradox: we make it harder to grow food at home. The World Bank’s Pakistan Country Economic Memorandum points out that high tariffs on agricultural machinery and fertilizers push up production costs for Pakistani farmers, making them less competitive and forcing the country to import what it could potentially produce itself. We tax the inputs, raise the costs and then wonder why we are importing wheat and palm oil. Reducing tariffs and para-tariffs on intermediate and capital goods for agriculture would improve yields, bring down costs and ease import dependency. The economic logic is straightforward, although the politics of reform are considerably more difficult.

Then there is the industrial machinery and raw materials pillar. Machinery imports jumped 25.2 percent to $6.7 billion in FY2024. Electrical machinery surged 95.7 percent. Mobile phone imports alone shot up 233 percent to $1.9 billion. Some of this reflects genuine industrial need. Much of it reflects a consumer economy that cannot source locally because domestic manufacturing capacity is either absent or uncompetitive. The World Bank has a clear prescription here: eliminate customs duties on raw materials, intermediates and capital equipment, keep moderate tariffs on finished consumer goods, and let exporters access inputs at world prices. The current system does the opposite. It protects inefficient domestic industries with high input costs while making our exporters pay more than their competitors abroad. That weakens Pakistan’s export competitiveness.

So what would a serious strategy look like? Three tracks, pursued together. First, energy transition. Fast-track Thar coal, solar and wind projects with the explicit goal of displacing imported fuel. Second, agricultural modernization. Slash tariffs on inputs, invest in water efficiency and cold-chain infrastructure, and build domestic processing capacity so we are less dependent on imported wheat and edible oils. Third, industrial tariff rationalization. Zero duties on raw materials and machinery, phased duties on consumer goods and strict enforcement against under-invoicing and misclassification which the World Bank identifies as a major source of revenue leakage.

The IMF is right that the Stand-By Arrangement has stabilized the economy. But stabilization is not growth, and growth is not possible with an import bill that keeps the current account permanently vulnerable. We cannot import our way to prosperity and we have seen repeatedly that banning imports does not work either. The persistent gap between Pakistan Bureau of Statistics and State Bank of Pakistan figures: driven by different reporting methodologies, timing, and valuation, only underscores how little institutional coordination exists. Without reform, the import bill will stay structurally unsustainable. The path forward is not mysterious. Indigenous energy, competitive agriculture and rational tariffs. Without structural reform, Pakistan is likely to remain vulnerable to future balance-of-payments crises.

The writer is serving as Director of the Institute of Humanities and Arts at Khwaja Fareed University of Engineering and Information Technology, Rahim Yar Khan, Pakistan.