Pakistan’s trade deficit skyrockets by 44% amid regional tensions

Dubai: Pakistan’s trade deficit with nine neighbouring countries widened sharply by 44.42% to $7.683 billion in the first half of fiscal year 2025-2026 (July—December), compared to $5.320 billion during the same period last year, according to the latest data from the State Bank of Pakistan.

The surge in the deficit is largely attributed to a decline in exports, particularly to China, Afghanistan, and Bangladesh. Pakistan has suspended all trade with Afghanistan, including exports, since October 10, 2025, further impacting regional trade flows.

Exports to India

While exports to India saw a marginal increase in percentage terms, their overall value remained negligible. Meanwhile, shipments to Bangladesh and Sri Lanka registered negative growth over the period under review, Dawn news reported.

In the first half of FY26, total exports to Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan, and the Maldives fell 18.56% to $1.965 billion, down from $2.413 billion in the same period last year. On the other hand, imports from these countries surged 24.76% to $9.648 billion, compared to $7.733 billion last year.

Imports from China

China remains the dominant source of imports, which grew 25.61% to $9.472 billion, while exports to China dropped 5.59% to $1.216 billion. Imports from India fell 12.73% to $97.734 million, with exports to India rising slightly to $2.926 million from $0.399 million in the same period last year.

Exports to Afghanistan plummeted 56.61% to $219.489 million, while imports declined 36.75% to $6.321 million. Bangladesh-bound exports dipped 7.54% to $358.499 million, and Sri Lanka saw a 27.13% drop in exports to $163.173 million, even as imports from both countries rose.

The widening trade gap follows a similar trend from FY25, when the deficit with these neighbours expanded 29.42% to $12.297 billion from $9.502 billion the previous year, highlighting ongoing challenges for Pakistan’s regional trade balance.