Trade deficit widens to $24bn in 11 months

ISLAMABAD: Pakistan’s trade deficit widened to $24 billion in the first eleven months of the current fiscal year as rising imports outpaced modest export growth, according to data released by the Pakistan Bureau of Statistics on Wednesday.

Despite trade imbalances, Pakistan’s broader macroeconomic indicators have shown signs of stabilisation. Headline inflation dropped to a historic low of 0.30 percent in April 2025, but a little rebound to 3.46 percent in May, while the current account recorded a surplus of $1.88 billion during July-April FY25 — a sharp turnaround from a $1.34 billion deficit in the same period last year. The improvement was underpinned by a 30.9 percent surge in workers’ remittances, which hit $31.2 billion, official data shows.

The merchandise exports grew by 4.72 percent to $29.44 billion from July to May in FY2024-25, while imports surged 7.3 percent to $53.45 billion. The resulting trade deficit -- up 10.6 percent from a year earlier —continues to strain Pakistan’s external accounts, putting pressure on the rupee and dollar reserves.

While merchandise exports faced a setback in May — falling 10.1 percent year-on-year to $2.55 billion — they still saw a strong monthly rebound, rising 17.4 percent from April. Imports in May grew 5.2 percent to $5.17 billion compared to the same month last year but dropped 7.6 percent month-on-month, offering some short-term relief on the external front.

Despit e the widening gap, some positive indicators offered relief. The country’s monthly average export volume stands at $2.67 billion — placing Pakistan on track to potentially exceed the $32 billion by end of the fiscal year 2024-25 in June.

Economists say high domestic interest rates have hampered export competitiveness, with businesses facing tight credit conditions as banks prioritise investment in government securities over private sector lending.

Meanwhile, the trade in services showed a smaller but notable deficit of $2.5 billion during July-April FY25, slightly higher than last year’s $2.4 billion.

Service imports rose 7.9 percent to $9.43 billion, while exports grew 9.3 percent to $6.93 billion, boosted by transport, IT, and business services.

The Information and Communication Technology (ICT) sector remained a bright spot, with exports climbing 21.1 percent to $3.14 billion — accounting for nearly half of all services exports. Government efforts to support the digital economy through freelancer incentives, skills training, and international certifications have begun to pay off, analysts say.