Business Recorder Editorials 31st August 2026

The Afghan challenge

EDITORIAL: The latest UN Security Council-mandated report presents a deeply troubling picture of the evolving terrorist threat to Pakistan, particularly the continued presence and support enjoyed by the Tehreek-i-Taliban Pakistan (TTP) in Afghanistan.

The reported links among the TTP, Al-Qaeda, Islamic State-Khorasan (ISIL-K) and the Baloch Liberation Army (BLA) make the challenge even more complex. Pakistan cannot afford to underestimate this increasingly interconnected militant ecosystem.

At the same time, the report’s finding that the Afghan Taliban have relocated around 2,000 TTP fighters and their families away from Pakistan’s border, and that Taliban supreme leader Hibatullah Akhundzada has warned the TTP leadership against attacks on Pakistan, deserves attention. These steps are clearly insufficient if the TTP’s command, training, and logistical infrastructure remain intact.

Yet they suggest that Kabul may have some capacity — and perhaps some willingness — to restrain the terrorist group. Pakistan therefore needs to keep the door open to negotiations with the Afghan Taliban while maintaining firm security and diplomatic pressure.

Dialogue should not be mistaken for weakness or concession. Rather, it can provide Islamabad with a channel through which to demand concrete and verifiable action against terrorist groups operating from Afghan territory.

There is already a useful regional framework on which to build. Senior officials from Pakistan, Afghanistan and China held informal trilateral talks in the Chinese city of Urumqi from April 1 to 7, 2026, with China facilitating efforts to reduce tensions following military clashes earlier in the year.

Islamabad pressed Kabul to take verifiable measures against the TTP and dismantle its safe havens, while Beijing is believed to have raised its own concerns about the East Turkestan Islamic Movement (ETIM) operating in the region.

Although the talks were exploratory and produced no major breakthrough, the participants reportedly agreed in principle to avoid actions that could further escalate tensions, and to explore a more comprehensive framework.

This channel should not be allowed to wither. China has a direct security interest in Afghanistan because of concerns about ETIM, while Pakistan faces the TTP and other militant organisations. Afghanistan itself confronts the growing threat posed by ISIL-K. These overlapping security concerns provide a basis for regional cooperation, even where political differences remain substantial.

A broader regional approach could also bring in Iran and the Central Asian states, which have their own concerns about terrorism, extremism and instability emanating from Afghanistan. Such engagement could create stronger incentives for the Afghan Taliban to prevent their territory from being used to plan, facilitate or launch attacks against neighbouring countries.

The UN report should therefore be viewed not only as a warning but also as an opportunity. Islamabad needs to keep the diplomatic door open to Kabul while making clear that meaningful engagement depends on measurable action against the TTP.

The objective should be neither confrontation for its own sake nor dialogue without conditions, but a calibrated strategy of pressure and engagement aimed at preventing Afghanistan from remaining a source of insecurity for the region.

Major impediments to export boost

EDITORIAL: Commerce Minister Jam Kamal Khan while briefing the Senate Standing Committee correctly noted that unless exporters were provided a conducive business environment, defined as not only appropriate domestic policies but also the prevailing international market conditions, Pakistan’s exports would not rise.

There is overwhelming evidence that monetary and fiscal policies agreed with the International Monetary Fund (IMF) under the ongoing Extended Fund Facility (EFF) programme - scheduled for completion in September 2027 - are serious impediments to growth in general and private sector growth in particular and include: (i) a policy rate of 11.5 percent that is more than double that of other regional competitors, including India and China, (ii) fiscal policy with the overarching objective to enhance government revenue, which has implied continuing reliance on customs duties that are negatively impacting on raw material imports critical for the manufacture of our major exports, and (iii) the administrative measures that have been agreed with the Fund require the government to meet the condition of full cost recovery on utilities like electricity and gas which, in turn, has implied ever-rising costs for exporters that are uncompetitive regionally.

It is noteworthy that the incentives that were almost routinely extended to the manufacturing sector, including exporters; notably, lower borrowing costs, zero rating for the country’s five major exports, and cheap tariffs (electricity), were not supported by the Fund, which provided impeccable logic in its October 2024 documents that approved the EFF: “Subsidies have taken the form of low-cost financing and other concessions, which although varied across industries, left financing and taxes net of subsidies more favourable than in peer economies and less-favoured sectors.

The tax system has been extensively used to provide non-transparent support through exemptions for privileged sectors like real estate, agriculture, manufacturing, and energy, as well as, through the proliferation of Special Economic Zones (SEZs).

The government’s intervention in price setting, including for agricultural commodities, fuel products, power, and gas (biannual), combined with high tariff and non-tariff protection tilted the playing field in favour of selected groups or sectors.

Despite all this support, the business sector has failed to become an engine of growth, and the incentives eventually weakened competition and trapped resources in chronically inefficient (including perpetually “infant”) industries.”

There is no doubt that none of these policy decisions falls within the purview of the Commerce Ministry and the key stakeholders remain the Finance Minister and the Governor State Bank of Pakistan who sign off on the Letter of Intent, detailing pledges in terms of fiscal and monetary policies till the next quarterly review.

In this instance, it is relevant to note that the Fund team is scheduled to begin talks on the fourth review sometime next month, whose success would enable the Board to approve the next tranche release, and there are some concerns that the Fund may insist on the same monetary and fiscal policies that may compromise growth and our exports.

This projection does not take account of the international recession wrought on by the Middle East conflict, and the choking-off of the Strait of Hormuz shipping traffic, accounting for not only plummeting exports to the Gulf countries but also a decline in demand for our largely consumer-based exports. It is unclear whether the US will go forward with its secondary sanctions against countries that continue to trade with Iran because in that case our exports through land would also suffer.

The Jam further noted that Commerce Ministry had suggested setting up a National Export Promotion Bureau; however, this may be as effective as the Commerce Ministry has been lately because the actual policy decisions would continue to be taken elsewhere – decisions that, at present, are only guided by the need to ensure the fourth staff level agreement as that would ensure that China and Saudi Arabia roll-over more than 10 billion dollars parked in our treasury for another year.