Global Rice News

The recent disruption in the Red Sea, a critical maritime trade route, has significant implications for Pakistan’s trade and overall economy, as emphasized in the Economic Survey of Pakistan 2023-24.

Pakistan heavily relies on maritime routes for over 90 percent of its trade volume. Therefore, any interruption in these routes can have a profound effect on the country’s economic stability.

The Red Sea has traditionally served as the shortest and most efficient trade pathway between Asia and Europe. However, recent disruptions have forced ships to take alternative routes around the Cape of Good Hope, adding over 3500 nautical miles and 10 to 12 days of sailing time. This considerable increase in travel distance has resulted in inflated freight costs, putting further strain on Pakistan’s economy.

Pakistan’s reliance on the Red Sea route is evident in its trade statistics. In FY 2023, around 60 percent of Pakistan’s exports, valued at USD 16.3 billion, and 30 percent of its imports, valued at USD 23.2 billion, were from the United States, European Union, and the United Kingdom. Disruptions in this crucial trade route have multifaceted repercussions, affecting the timely arrival of essential goods like raw materials and finished products, thereby disrupting domestic supply chains.

The delay in the supply of imported raw materials has exacerbated slowdowns in production, especially in the Large-Scale Manufacturing (LSM) sector. The increase in freight charges poses a significant threat to Pakistan’s major export commodities, including textiles, rice, and fruits. Notably, the textile sector, which accounts for approximately 60 percent of Pakistan’s total exports, is under immense pressure. The timely availability of raw materials and machinery imports is crucial for textile and apparel producers. Disruptions in shipping schedules lead to production delays and higher costs.

For example, shipping companies raised freight charges by 140 percent in mid-January, going from USD 750 to around USD 1800. This drastic increase impacts exporters and undermines the competitiveness of Pakistani products in international markets. Additionally, escalating tensions in the Red Sea have resulted in a decline in demand for Pakistani rice from traditional buyers in the Middle East, the United States, and Europe.

The complexity of the Red Sea disruption highlights the severity of its consequences for Pakistan’s economy. Prolonged interruptions will continue to hinder supply chains, potentially impeding efforts to control inflation. Addressing these challenges is crucial to safeguard Pakistan’s economic stability and global competitiveness. The government should explore alternative trade routes and seek international support to mitigate the impact of these disruptions on the nation’s economy.

Source: [PkRevenue.com](https://pkrevenue.com)