Pakistan's Exports Plunge 20.4%, Trade Deficit Widens Amid Crisis

Exports contracted to approximately $2.32 billion from nearly $2.91 billion in December 2024. Imports, on the other hand, continued to expand, rising by about 2 per cent to $6.02 billion, pushing the monthly trade deficit up by nearly 24 per cent to $3.7 billion, according to an article in The Maldives Insider

The persistent contraction in export earnings points to deeper structural issues, including limited product diversification, declining competitiveness, and insufficient integration into global value chains. The export slide reflects a prolonged inability to generate sufficient foreign exchange through merchandise sales abroad, the article pointed out.

Data from the Pakistan Bureau of Statistics indicate that export proceeds over the first six months of the 2025-26 fiscal year (July-December) declined by around 8.7 per cent to $15.18 billion, even as imports rose by 11.3 per cent to $34.39 billion.

The resulting trade deficit for this period ballooned to $19.2 billion, 35 per cent higher than in the same period the previous year.

Pakistan's external sector has long been characterised by chronic trade imbalances, with export performance widely acknowledged as a weak link in economic stability.

Decades of data show that Pakistan's merchandise exports have hovered within a narrow range, failing to keep pace with rising import demand or regional competitors.

In recent years, governments have relied heavily on foreign official flows, remittances from overseas workers, and occasional debt-financing to stabilise the economy and support the balance of payments.

These measures, however, have masked the underlying fragility of export dynamics rather than addressing their root causes. The December data made clear that this fragility is now translating into tangible economic strain.

The increase in imports, especially when seen alongside the sharp export contraction, has intensified pressure on Pakistan's trade balance.

Imports crossing the $6 billion mark in December - the highest level during the current fiscal year - signal renewed demand for foreign goods that has outpaced export performance.

Economic commentators note that recent policy shifts towards trade normalisation and liberalisation may have revived import demand faster than expected. While a rebound in imports can reflect economic activity, it also enlarges the trade deficit when not matched by export growth.

The mismatch between import growth and export contraction highlights a persistent disconnect between domestic consumption needs and the economy's capacity to generate foreign exchange through sales abroad.

In a country where manufacturing and export sectors have struggled to scale up, rising import dependence further strains the external account and narrows policy options for stabilising reserves without compromising domestic liquidity.

- IANS