Pakistan’s external trade pressures intensified in August 2025 as the country’s trade deficit widened by more than 30% year-on-year, underscoring persistent challenges in balancing exports with growing import demand. According to data released by the Pakistan Bureau of Statistics (PBS) on Tuesday, the trade deficit reached $2.87 billion during the month, compared with $2.20 billion in the same period last year.
The widening gap is attributed to a simultaneous fall in exports and an increase in imports. Exports in August 2025 stood at $2.42 billion, marking a 12.5% decline from $2.76 billion recorded in August 2024. Imports, however, climbed over 6% to $5.29 billion, up from $4.96 billion in the same month of the previous year. This combination of weaker export performance and rising import needs has placed added strain on Pakistan’s already fragile external account.
While the year-on-year figures paint a worrying picture, the month-on-month data offers a slightly more positive signal. Compared to July 2025, when the deficit was $3.14 billion, August’s trade deficit showed a 9% reduction. This suggests some improvement in the pace of import growth and a modest stabilization in export flows, though the overall trend remains unfavorable.
Looking at the broader picture, the trade deficit for the first two months of the fiscal year 2025-26 (July–August) swelled to $6.01 billion, reflecting a 29% increase from the $4.66 billion deficit recorded during the same period of the previous fiscal year. The cumulative numbers highlight how quickly pressures are building on Pakistan’s external sector as the new fiscal year unfolds.
Exports during the two-month period showed little momentum, inching up just 0.6% to $5.1 billion compared to $5.06 billion in the same period last year. Imports, in contrast, surged 14% to $11.12 billion from $9.73 billion in the corresponding months of FY25. This sharp rise in imports—driven by fuel, machinery, and essential commodities—has further tilted the balance against Pakistan’s trade outlook.
The persistent trade gap raises concerns about Pakistan’s ability to manage its external obligations without further reliance on foreign borrowing or concessional support. Analysts note that structural weaknesses in export competitiveness, combined with the country’s dependence on imports for energy and industrial inputs, continue to exacerbate the trade imbalance. Without meaningful diversification of exports and stronger policy measures to curb non-essential imports, the deficit is likely to remain elevated.
At the same time, global economic conditions and exchange rate dynamics are adding layers of complexity. Slower demand in key export markets, coupled with domestic cost pressures, has weighed heavily on Pakistan’s export sectors. On the other hand, import demand remains sticky due to structural reliance on essential goods and limited domestic substitutes.
As the fiscal year progresses, policymakers face the urgent task of narrowing the trade gap to contain pressure on foreign reserves and the rupee. Efforts to expand export markets, strengthen value-added production, and implement import substitution strategies will be critical in easing the external account burden. However, with rising global oil prices and slowing external demand, the road to rebalancing remains challenging.
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