Data released by the Pakistan Bureau of Statistics (PBS) on Wednesday indicates that the country’s trade deficit expanded to $24 billion during the first 11 months of the current fiscal year. This represents a 10.6% increase compared to the same period last year, primarily driven by a significant surge in imports that outpaced a more modest growth in exports.
From July to May in fiscal year 2024-25, merchandise exports experienced a 4.72% rise, reaching $29.44 billion. However, imports climbed by 7.3% to $53.45 billion. This expanding gap between imports and exports continues to exert pressure on Pakistan’s external accounts, impacting the value of the rupee and foreign exchange reserves.
Despite these trade imbalances, Pakistan’s broader macroeconomic indicators have shown signs of stabilization. Headline inflation, after a historic low of 0.30% in April 2025, slightly rebounded to 3.46% in May. Crucially, the country’s current account recorded a surplus of $1.88 billion during July-April FY25, marking a significant turnaround from a $1.34 billion deficit in the corresponding period last year. This improvement in the current account was largely propelled by a substantial 30.9% surge in workers’ remittances, which amounted to $31.2 billion.
While merchandise exports faced a setback in May, falling 10.1% year-on-year to $2.55 billion, they still demonstrated a strong monthly rebound, increasing 17.4% from April. Imports in May grew 5.2% to $5.17 billion compared to the same month last year but decreased 7.6% month-on-month, offering some short-term relief on the external front.
Despite the widening deficit, some positive indicators provided relief. The country’s monthly average export volume stands at $2.67 billion, positioning Pakistan to potentially exceed $32 billion by the end of fiscal year 2024-25 in June.
Economists attribute hampered export competitiveness to high domestic interest rates, with businesses facing tight credit conditions as banks prioritize 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% to $9.43 billion, while exports grew 9.3% to $6.93 billion, boosted by strong performances in transport, IT, and business services.
The Information and Communication Technology (ICT) sector remained a highlight, with exports climbing 21.1% to $3.14 billion, accounting for nearly half of all services exports. Analysts suggest that government initiatives to support the digital economy through freelancer incentives, skills training, and international certifications have begun to yield positive results.
