Challenges & Opportunities of Pakistan's Agricultural Exports

This study examines the impact of agricultural exports on Pakistan’s economic growth within a dual economy framework, combining macroeconomic insights with the grassroots realities of farmers, rural laborers, and urban industrial workers. Employing a human-centered lens, it explores how trade policies, market access, and technological innovations shape the country’s growth trajectory while highlighting sectoral disparities. Drawing on empirical data from 2010 to 2024, the analysis reveals that although agricultural exports contribute significantly to foreign exchange earnings and rural employment, their overall impact on long-term economic growth remains modest due to structural bottlenecks, policy fragmentation, and low value addition.

In developing economies, export-led growth strategies have historically been endorsed by classical economists like Smith (1776) and Ricardo (1817), emphasizing comparative advantage. Pakistan, an agrarian economy, relies heavily on agricultural exports such as rice, cotton, and fruits, which account for approximately 21% of the GDP and engage nearly 45% of the labor force (Economic Survey of Pakistan, 2024). However, the persistence of a dual economy, characterized by a high-productivity industrial sector and a low-productivity agricultural sector, has led to uneven development and income inequality (Lewis, 1954).

The study highlights the need for a paradigm shift in agricultural trade policy to unlock inclusive growth. Strategic priorities should include increasing investment in agri-processing infrastructure, promoting digital agriculture, diversifying export markets, and integrating smallholders into global value chains. Moreover, reducing post-harvest losses, improving certification systems, and enhancing supply chain logistics are critical for making agricultural exports more competitive.

Ultimately, bridging the agricultural-industrial productivity gap requires coherent, inclusive, and forward-looking policy measures that prioritize rural transformation. By aligning trade policy with human development goals, Pakistan can harness agricultural exports not just as a source of revenue but as a catalyst for sustainable, equitable growth.

Understanding the Export-Led Growth Paradox and the Dual Economy Trap

Despite contributing over $8.1 billion annually to Pakistan’s foreign exchange earnings (SBP, 2024), agricultural exports have delivered only volatile and inconsistent gains to GDP growth. This phenomenon, referred to as the export-led growth paradox, reflects how global price fluctuations, supply chain disruptions, and limited domestic value addition undercut the transformative potential of agricultural trade. While short-term export revenues rise, long-term impacts on employment, productivity, and structural development remain limited. This is especially true when export surges are concentrated in a few raw commodities with low processing levels, such as rice and cotton.

These challenges are deeply rooted in Pakistan’s dual economy structure, a concept articulated by Lewis (1954), where two coexisting sectors operate at vastly different levels of productivity and capital intensity. On the one hand, the modern sector, dominated by urban-based, capital-intensive industries like textiles and garments, contributes over 60% of national exports. On the other, the traditional sector, largely composed of smallholder farms under 2 hectares, remains labor-intensive, under-capitalized, and marked by declining marginal returns.

This structural imbalance fuels persistent rural-to-urban migration, wage disparities, and underemployment. While agriculture employs 63% of the rural population, its productivity has stagnated at just 1.5% annual growth (FAO, 2023). This indicates a significant resource misallocation, where human capital remains trapped in low-productivity settings due to lack of investment, mechanization, and financial inclusion.

Furthermore, while agricultural exports serve as a foreign exchange multiplier, their inability to catalyze broader industrialization highlights a missed opportunity for sectoral convergence. Without forward linkages to agro-processing, packaging, or logistics industries, export gains do not translate into value-added growth. Thus, to resolve this paradox, Pakistan must reorient its export strategy to address dual economy disparities, enhance rural productivity, and ensure equitable integration of traditional sectors into modern value chains.

Trends, Challenges, and Policy Priorities for Agricultural Trade

Agricultural exports in Pakistan have witnessed notable growth in FY2023–24, with major crops expanding by 16.82%, cotton ginning rising by 47.23%, and fruits and vegetables registering growth between 5.77% and 8.40%, contributing a combined 13.9% to GDP (Pakistan Economic Survey, 2024). This expansion was led by key commodities such as rice, which alone accounted for $2.5 billion in export revenue, and textiles at $16.4 billion. However, this growth has been accompanied by a 15.8% increase in agricultural imports, particularly agrochemicals, machinery, and fertilizers, indicating a persistent reliance on foreign inputs that narrows the net export margin (SBP, 2024).

Despite short-term gains, structural inefficiencies continue to undermine the long-term growth impact of agricultural exports. Research by Wahid et al. (2015) found a negative correlation between agricultural exports and GDP growth due to Pakistan’s dependence on low-value raw commodities such as raw cotton. Similar findings in West Africa by Richardson et al. (2016) highlight that weak value chains often result in minimal economic spillovers. In contrast, evidence from China shows that digital agriculture can increase exports by 14% through better efficiency and traceability (Zhou et al., 2024). Yet, in Pakistan, only 12% of farmers use precision agriculture technologies (ITU, 2023), restricting export competitiveness and innovation.

Econometric analysis reveals that a 1% increase in agricultural exports boosts GDP by 0.26% in the short term, but over-reliance on unprocessed exports constrains sustainable growth. To address this, Pakistan must prioritize value addition, transitioning from raw cotton to finished textiles could generate an additional $5 billion annually. Digital transformation through agri-tech adoption and blockchain can modernize supply chains and enhance market access. Improving rural labor productivity by investing in education and reducing the rural-urban literacy gap (currently 54% vs. 72%) is equally essential. Trade policy reforms should also encourage high-value crops and rationalize minimum support prices to promote export diversification. A coordinated strategy focused on innovation, inclusion, and value chain development can unlock the full potential of agricultural exports as a driver of equitable and resilient economic growth.

Conclusion

Pakistan’s agricultural exports, while significant in foreign exchange earnings and rural employment, have yet to translate into sustained, broad-based economic growth due to the country’s entrenched dual economy structure. The traditional agricultural sector, marked by low productivity, limited value addition, and minimal technological integration, continues to lag behind the modern industrial sector, deepening rural-urban disparities. Though major crops and commodity exports such as rice and cotton show year-on-year growth, overreliance on unprocessed goods and global market volatility constrains their developmental impact.

The export-led growth paradox reveals that without structural transformation, through value chain enhancement, digital innovation, and human capital investment, agricultural exports alone cannot drive long-term progress. Moreover, the failure to integrate smallholders into global supply chains and the limited adoption of agri-tech continue to weaken Pakistan’s competitiveness.

To resolve these challenges, trade policy must pivot toward fostering value-added exports, expanding digital and physical infrastructure, and prioritizing inclusive rural development. Reducing the productivity gap between sectors through targeted education, financial inclusion, and better market access is essential. A future-forward export strategy, aligned with inclusive growth and sustainability, can transform agriculture from a subsistence sector into a dynamic engine of national prosperity, ensuring that growth is not only export-driven but also equitable and resilient.

References: Economic Survey of Pakistan; FAO; Zhou, et al.; World Bank; Smith; Ricardo; Lewis; Wahid et al.; Richardson et al.; Zhou et al.; ITU

Please note that the views expressed in this article are of the author and do not necessarily reflect the views or policies of any organization.

The writer is affiliated with the Institute of Agricultural and Resource Economics, University of Agriculture, Faisalabad, Pakistan.

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