Pakistan’s external trade performance in the first quarter of the ongoing fiscal year FY26 has raised alarms as exports slipped while imports continued to climb, significantly widening the country’s trade deficit. The latest data released by the Pakistan Bureau of Statistics (PBS) shows that exports from July to September 2025 fell 3.83 percent year-on-year to USD 7.60 billion, compared to USD 7.91 billion recorded during the same period last year.
In stark contrast, imports surged 13.49 percent in the same quarter, reaching USD 16.97 billion compared to USD 14.95 billion in the corresponding quarter of the previous fiscal year. This imbalance has once again highlighted Pakistan’s structural trade challenges and dependency on imported goods, which remain difficult to curb despite multiple policy efforts.
The September 2025 trade performance further underscored these concerns. Exports for the month dropped to USD 2.50 billion, reflecting an 11.71 percent year-on-year decline from USD 2.84 billion in September last year. Imports in the same month climbed to USD 5.84 billion, up from USD 5.13 billion, resulting in a trade deficit of USD 3.34 billion — a staggering 45.83 percent jump compared to the same month in FY25.
On a month-on-month basis, there were slight improvements in export figures. September exports rose 3.64 percent compared to August, increasing from USD 2.42 billion to USD 2.50 billion. However, imports rose more sharply by 10.53 percent over the same period, expanding from USD 5.29 billion in August to USD 5.84 billion in September. Consequently, the monthly trade deficit widened by 16.33 percent, climbing from USD 2.87 billion to USD 3.34 billion.
The fall in exports has been primarily driven by a slowdown in the textile sector, which contributes around 60 percent of Pakistan’s total export revenue. Former chairman of the All Pakistan Textile Mills Association (APTMA), Asif Inam, attributed the downturn to declining international cotton prices and elevated domestic energy costs. He noted that cotton prices have dropped from USD 1.50 per pound to just 64 cents, compressing margins for textile manufacturers. Inam argued that if electricity costs were reduced to 7 cents per unit instead of the current 12–13 cents, textile exports could potentially reach USD 25 billion within two to three years.
The services trade, however, provided some relief. According to PBS data, Pakistan’s exports of services in the July–August FY26 period rose by 11.73 percent to USD 1.4 billion, up from USD 1.25 billion last year. Imports of services during the same period increased 15.37 percent to USD 2.1 billion compared to USD 1.85 billion previously. The services trade deficit widened to USD 707 million from USD 604.8 million last year, an increase of 16.94 percent.
While the uptick in services exports indicates resilience in segments such as IT and digital services, the overall trade balance remains weighed down by weak goods exports and accelerating imports. Experts caution that without targeted policy reforms, structural issues in Pakistan’s export sector — particularly in textiles — will continue to hinder growth and put pressure on the external account.
The widening trade deficit in Q1 FY26 underlines the urgency for Pakistan to address competitiveness challenges, reduce input costs for exporters, and diversify its export base to stabilize the country’s external position.
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