ISLAMABAD: Pakistan’s trade deficit with nine neighbouring countries increased by 27.94 per cent in the first two months of FY26, reaching $2.592 billion compared to $2.026bn in the same period last year.
The widening deficit comes amid a decline in exports to most regional markets, with the exception of China, where exports showed signs of recovery during the period.
In FY25, Pakistan’s trade deficit with these countries had already grown by 29.42pc, rising to $12.297bn from $9.502bn in FY24. The trend of widening trade deficits has been consistent, as imports continue to surge while exports remain subdued.
In terms of exports, Pakistan’s shipments to the nine countries — Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan, and the Maldives — fell by 1.52pc, totalling $654.05m in July-August FY26, down from $664.13m in the same months last year. For FY25, exports to these countries had increased by 1.49pc, reaching $4.401bn, up from $4.336bn in FY24.
The decline in exports this year is largely due to negative growth in shipments to Bangladesh and Afghanistan. Exports to Afghanistan, for instance, dropped by 25.44pc in the first two months of FY26, falling to $109.34m from $146.65m in the same period last year. This decline contrasts with a 38.68pc increase in exports to Afghanistan in FY25, which reached $773.89m, primarily driven by sugar exports.
Exports to most regional markets drop, excluding China and Sri Lanka
Exports to Bangladesh also saw a slight decline of 4.7pc, totalling $116.27m in the first two months of FY26, compared to $122.01m last year. However, the country saw a significant 19.08pc increase in exports to Bangladesh during FY25, reaching $787.35m, primarily due to growing rice exports after the political changes in Dhaka.
In contrast, exports to China showed a slight increase of 9.59pc in the first two months of FY26, rising to $354.47m from $323.44m during the same period last year. Despite this improvement, exports to China fell by 8.6pc in FY25, dropping to $2.476bn from $2.709bn in FY24.
Meanwhile, imports from China have continued to increase. In the first two months of FY26, imports from China grew by 21.58pc, totalling $3.2bn, compared to $2.632bn last year. In FY25, imports from China amounted to $16.312bn, up 20.79pc from $13.504bn in FY24. The bulk of Pakistan’s imports from the region continue to come from China, followed by India and Bangladesh.
Imports from India showed a notable decline of 55.53pc in the first two months of FY26, falling to $16.98m from $38.19m during the same period last year. However, in FY25, imports from India increased slightly to $220.58m, up from $206.89m in FY24. The decline in imports from India this year is largely due to limited trade activity amid ongoing political tensions.
Exports to Sri Lanka saw a marginal increase of 1.48pc in the first two months of FY26, rising to $70.92m from $69.88m last year. This marks a potential revival in trade with Sri Lanka, despite a 4.14pc decline in exports in FY25. Imports from Sri Lanka also rose by 17.58pc, totalling $11.37m in FY26, up from $9.67m last year.
The trade situation with Iran remains opaque, as most transactions are conducted through informal channels, with Pakistan relying on barter trade for oil and gas imports. No official data is available on trade with Iran, but the growing smuggling of Iranian petroleum products along the Balochistan border continues to affect formal trade figures.
Meanwhile, exports to Nepal and the Maldives saw minimal changes. Exports to Nepal fell to $0.26m in FY26, down from $0.39m last year, while exports to the Maldives dropped slightly to $1.63m from $1.75m. No trade was observed with Bhutan in the first two months of FY26.
Overall, Pakistan’s trade deficit with its regional partners continues to widen, driven by higher imports, especially from China, and a decline in exports to key markets. This growing trade imbalance highlights the challenges facing Pakistan’s foreign trade sector, with concerns over the sustainability of current trade patterns and the need for policy interventions to improve export performance.
Published in Dawn, September 21st, 2025
