Politics & Government
Pakistan's finance minister heads to US to finalise trade deal
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Published in Business and Finance on Tuesday, July 29th 2025 at 4:42 GMT by reuters.com🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source
Pakistan's Finance Minister Muhammad Aurangzeb has left for his second visit to the United States in two weeks to finalise a trade deal with Washington, his office said late on Monday.
Pakistan's Finance Minister Embarks on Crucial US Visit to Seal Landmark Trade Deal
ISLAMABAD/WASHINGTON - In a pivotal move aimed at bolstering Pakistan's struggling economy, Finance Minister Muhammad Aurangzeb is set to travel to the United States this week to finalize a long-anticipated trade agreement that could reshape bilateral economic ties. The visit, scheduled to commence on July 30, 2025, comes at a time when Pakistan is grappling with persistent fiscal challenges, including high inflation, a ballooning current account deficit, and the lingering effects of recent natural disasters. Sources close to the negotiations indicate that the deal, if sealed, could unlock billions in trade opportunities, providing a much-needed lifeline to Pakistan's export-dependent sectors such as textiles, agriculture, and information technology.
The proposed trade pact, which has been in the works for over two years, is expected to focus on reducing tariffs, enhancing market access, and fostering investment in key industries. According to preliminary details shared by Pakistan's Ministry of Finance, the agreement could lead to an annual increase in exports to the US by up to 15%, potentially adding $2-3 billion to Pakistan's foreign exchange reserves. This is particularly significant given Pakistan's recent reliance on international bailouts, including a $3 billion standby arrangement from the International Monetary Fund (IMF) approved in 2023, which imposed stringent austerity measures. Minister Aurangzeb, a former banker with extensive experience in international finance, has been vocal about the need for sustainable economic partnerships beyond aid dependency. "This trade deal represents a shift from short-term relief to long-term growth," he stated in a press briefing last week, emphasizing the importance of diversifying Pakistan's trade portfolio away from traditional partners like China and the European Union.
The backdrop to this visit is a complex web of geopolitical and economic factors. Pakistan's economy has been under strain since the COVID-19 pandemic, exacerbated by the devastating floods of 2022 that wiped out vast agricultural lands and displaced millions. Inflation soared to record highs, peaking at over 30% in 2023, while the Pakistani rupee depreciated sharply against the US dollar. The government, led by Prime Minister Shehbaz Sharif, has implemented reforms such as subsidy cuts and tax hikes to meet IMF conditions, but these have sparked public unrest and political instability. Against this, the US has emerged as a key ally, not just economically but also strategically, amid shifting dynamics in South Asia. The Biden administration, in its final months, views the deal as a way to counterbalance China's growing influence in the region through initiatives like the Belt and Road Initiative (BRI), which has funneled billions into Pakistani infrastructure but also raised debt concerns.
During his trip, Minister Aurangzeb is expected to hold high-level meetings with US Treasury Secretary Janet Yellen, Commerce Secretary Gina Raimondo, and representatives from the Office of the United States Trade Representative (USTR). Agenda items include negotiations on intellectual property rights, labor standards, and environmental protections—areas where Pakistan has faced criticism in past trade discussions. US officials have expressed interest in promoting sustainable practices, particularly in Pakistan's textile industry, which accounts for nearly 60% of the country's exports. A joint statement from both governments last month highlighted mutual commitments to "fair and equitable trade" that aligns with global standards, including those set by the World Trade Organization (WTO).
Experts believe the deal could have far-reaching implications. Dr. Aisha Ghaus Pasha, a former finance minister and economic analyst, told Reuters that "finalizing this agreement would not only boost exports but also attract foreign direct investment (FDI) in sectors like renewable energy and digital services." Pakistan's FDI inflows have dwindled in recent years, dropping to under $2 billion annually from a high of $5 billion in the mid-2010s. The trade pact might include provisions for US companies to invest in Pakistan's Special Economic Zones (SEZs), established under the China-Pakistan Economic Corridor (CPEC). This could create synergies between US and Chinese investments, though it risks complicating relations amid US-China trade tensions.
From the US perspective, the agreement aligns with broader foreign policy goals. The US has been Pakistan's largest export market, with bilateral trade reaching $6.5 billion in 2024, dominated by Pakistani apparel and home textiles. However, imbalances persist, with Pakistan importing more from the US in machinery and raw materials. The deal aims to address this by granting preferential access for Pakistani goods under the Generalized System of Preferences (GSP), which lapsed in 2020 and has been a point of contention. Renewing or expanding GSP could benefit over 3,000 Pakistani products, from surgical instruments to sports goods, potentially creating thousands of jobs in export-oriented industries.
Challenges remain, however. Domestic opposition in Pakistan, particularly from labor unions and small-scale farmers, fears that increased competition could harm local markets. Critics argue that without adequate safeguards, the deal might lead to a surge in cheap US imports, undermining Pakistan's nascent industries. On the US side, concerns about human rights, political stability, and counter-terrorism cooperation could influence the negotiations. Pakistan's recent elections in 2024, marred by allegations of irregularities, have drawn international scrutiny, and US lawmakers have linked trade concessions to improvements in governance.
Minister Aurangzeb's itinerary also includes engagements with the Pakistani diaspora in the US, a vital source of remittances that exceeded $30 billion in 2024. He plans to address business forums in New York and Washington, pitching Pakistan as an emerging hub for tech startups and green energy projects. "We are not just seeking trade; we are building bridges for innovation and mutual prosperity," Aurangzeb remarked in an interview with a local broadcaster.
If successful, the trade deal could set a precedent for similar agreements with other Western partners, helping Pakistan navigate its economic recovery. Economists project that with this boost, Pakistan's GDP growth could accelerate to 4-5% in fiscal year 2026, up from the current 2-3% estimates. However, failure to close the deal might force Pakistan back to the IMF for another bailout, perpetuating a cycle of dependency.
As Aurangzeb boards his flight to Washington, the stakes are high. This visit is more than a diplomatic formality; it's a test of Pakistan's ability to pivot towards self-reliant growth in an increasingly multipolar world. Stakeholders on both sides are optimistic, but the devil, as always, lies in the details. The coming days will reveal whether this trade pact becomes a cornerstone of economic revival or another missed opportunity in Pakistan's turbulent journey.
In the broader context of global trade, this agreement underscores the evolving US strategy in Asia. With the Indo-Pacific Economic Framework (IPEF) gaining traction, Pakistan's inclusion in US-led trade initiatives could enhance regional stability. For Pakistan, it's an opportunity to leverage its strategic location, young workforce, and untapped resources. The finance minister's delegation includes experts from the Board of Investment and the Export Promotion Bureau, signaling a comprehensive approach to negotiations.
Potential hurdles include currency fluctuations and global supply chain disruptions, which have plagued trade talks worldwide. Pakistan's central bank has been intervening to stabilize the rupee, but external shocks like rising oil prices could derail progress. Nonetheless, both nations have invested significant diplomatic capital in this endeavor, with preparatory virtual meetings held throughout 2025.
The deal's environmental component is noteworthy. Pakistan, vulnerable to climate change, seeks US assistance in transitioning to sustainable agriculture and clean energy. This could involve technology transfers for solar and wind projects, aligning with Pakistan's commitments under the Paris Agreement.
Socially, the agreement might address gender equality in trade, promoting women's participation in export sectors. Pakistan's female labor force in textiles could benefit from US-backed training programs, fostering inclusive growth.
In conclusion, as Minister Aurangzeb arrives in the US, the world watches closely. This trade deal could mark a turning point, not just for Pakistan's economy but for US-Pakistan relations in a post-pandemic era. Success here might inspire confidence in international markets, encouraging further investments and partnerships. Failure, however, would highlight the fragility of Pakistan's economic reforms and the challenges of bridging geopolitical divides through commerce.
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