Pakistan’s widening trade deficit reached $2.44 billion in December, a 35% YoY increase and the highest since April, driven by a sharp 17.4% monthly rise in imports against stagnant export performance, according to data released by Pakistan Bureau of Statistics (PBS) on January 1.
For July-December 2024, the trade deficit reached $11.17 billion, up 0.18% YoY. Exports during this period rose by 11% to $16.56 billion, while imports grew 6.1% to $27.7 billion.
Exports grew marginally from $2.833 billion in November 2024 to $2.841 billion in December. Subdued global demand for textiles and other key exports restricted gains.
Experts warned of challenges ahead, with December’s steep import bill threatening fiscal stability.
“Without a strategic focus on improving export competitiveness, the trade imbalance will continue to exert pressure on the economy,” said an industry analyst.
Analysts are recommending diversifying exports and targeting new markets to counterbalance the trade gap.
Pakistan’s services trade deficit shrank by 8.5% YoY to $1.15 billion for July-November 2024, supported by a 7.6% increase in services exports to $3.27 billion.
November’s services trade deficit dropped to $152.9 million, a 42.4% month-on-month reduction, driven by a 13.1% decline in imports.
Despite a slight dip in monthly services exports, YoY performance improved by 6.5%, highlighting the sector’s growing role in economic diversification. “The consistent improvement in services exports is encouraging, but strategic investments are essential to realize its full potential,” said a trade analyst.
Imports rose in December
Pakistan’s monthly goods imports surged to $5.2 billion in December 2024, the highest in two years and a $800 million increase from November 2024’s $4.4 billion.
The 27-month high reflected a 14% year-on-year (YoY) rise and underscores increased demand for raw materials and essential commodities. The December rebound followed a dip to $4.5 billion in December 2023, signaling renewed trade momentum and stronger regional partnerships.
“The rising import trajectory is concerning, especially when paired with sluggish export growth,” noted a senior economist.
Iran emerged as a key trade partner, with imports from the country reaching $129.7 million in November 2024, a 47% YoY increase for the July-November period. Trade with India also showed resilience despite suspended formal relations, with a 5% YoY increase in imports during August 2024.
Analysts attributed the surge to eased import restrictions, regional collaboration, and industrial recovery.
Pakistan’s trade deficit with neighbors jumps 47.5% due to higher imports
According to a recent Dawn report, Pakistan’s trade deficit with nine neighboring countries surged by 47.55%, reaching $4.474 billion in the first five months of FY25, compared to $3.032 billion in the same period last year. This increase was primarily driven by higher imports from China and India, which played a major role in the overall trade imbalance. However, there were notable increases in exports to Afghanistan, Bangladesh, and Sri Lanka.
The value of Pakistan’s exports to these nine countries — Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan, and the Maldives — rose by 5.99% to $1.962 billion in the July-November FY25 period, up from $1.851 billion in the previous year. This rise, however, was not sufficient to offset the surge in imports, which contributed to the widening trade deficit.
- China: Imports increased by 32.4%, totaling $6.276 billion, while exports to China decreased by 13.9%.
- India: Imports grew by 6.19%, contributing to the trade gap, while exports remained relatively low.
- Afghanistan: Exports saw a significant rise of 73.37% to $406.67 million, while imports were just $8.53 million.
- Bangladesh: Exports grew by 29.76% to $313.99 million, with imports rising by 18% to $30.75 million.
- Sri Lanka: Exports surged by 25.3% to $183.89 million, reflecting economic recovery in the country.
- Iran: No official trade data is available, with much of the trade carried out informally through smuggling routes.
- Nepal: Exports fell by 34% to $0.96 million, showing a decline in trade.
- Maldives: Exports rose modestly by 5.74% to $4.0 million.
- Bhutan: No trade was recorded with Bhutan in the first five months of FY25.
Despite these gains in exports to certain countries, overall exports to the region rose by only 5.99%, totaling $1.962 billion. Imports increased by 31.8%, reaching $6.436 billion.
The widening trade deficit, especially with China, poses a growing challenge for policymakers, echoing concerns from the previous fiscal year when the trade gap with these countries had reached $9.506 billion, a 49% increase from the prior year.
According to data compiled by the State Bank of Pakistan, the rising imports and stagnating exports could potentially destabilize the country’s fiscal balance, requiring urgent attention from economic strategists.