Pakistan’s merchandise trade deficit surged by approximately 20 percent, reaching $32 billion during the first ten months of the current fiscal year, as imports continued to outpace exports, data from the Pakistan Bureau of Statistics (PBS).
Between July and April of FY2026, imports increased nearly 7 percent to $57.2 billion, while exports declined by over 6 percent to $25.2 billion, exacerbating the overall trade imbalance. This trend was evident in April as well, when the monthly trade deficit rose by almost 4 percent year-on-year to just above $4 billion. Although exports grew by about 14 percent to $2.48 billion, they were overshadowed by a 7.5 percent increase in imports, which reached $6.55 billion.
Notably, Pakistan’s export performance has been under pressure since August 2025, with the exception of July, when shipments experienced a robust year-on-year growth of more than 16 percent. Following that, export earnings sharply declined, including a drop exceeding 20 percent in December, with further contractions observed in February and March. Despite a modest recovery in January and a stronger rebound in April, analysts suggest these improvements were insufficient to counterbalance the rising import costs.
Trade experts attribute the persistent deficit largely to elevated demand for energy and industrial raw materials, which has kept import volumes high.
Meanwhile, in the services sector, the deficit narrowed by roughly 6.7 percent to $2.15 billion during July-March FY2026. This was driven by a 17 percent increase in services exports, which rose to $7.35 billion, while services imports grew by nearly 11 percent to $9.5 billion. March witnessed a notable improvement, with the services deficit shrinking significantly year-on-year, supported by higher export receipts and relatively stable import levels.
Despite these gains in services trade, Pakistan’s external accounts remain strained due to sustained high import levels and sluggish export growth, which continue to pressure the overall balance.
In a significant development, analysts have warned that ongoing geopolitical tensions in the Strait of Hormuz and the broader Middle East conflict could further disrupt trade routes, elevate shipping costs, and reduce demand in key export markets.
The government has recently implemented measures, including reductions in energy tariffs, aimed at bolstering exporters. However, the full impact of these initiatives has yet to be realized.
