Falling Exports, Rising Imports Strain Pakistan’s External Sector Stability
Pakistan recorded a trade deficit of $19.2 billion during the first half (July–December) of the current fiscal year, reflecting a sharp deterioration in the external sector as exports declined while imports rose faster than projections. The deficit was 35% higher than the same period last year and already accounts for nearly two-thirds of the full-year official target, raising concerns that the central bank may need to purchase additional dollars from the market to sustain foreign exchange reserves.
Export Slump Deepens Trade Gap as Tax Scrutiny Adds Pressure on Businesses
Exports fell across all benchmarks—month-on-month, year-on-year, and half-yearly—dropping 8.7% to $15.2 billion, or just 42% of the annual target. Exporters have attributed the slump partly to an overvalued rupee, which they say has eroded competitiveness and profitability. Meanwhile, the expected benefits of trade liberalisation have not materialised, contradicting World Bank projections that anticipated stronger export growth relative to imports.
In contrast, imports rose 11.3% to $34.4 billion in the first half, surpassing half of the annual target and intensifying pressure on the external account. The imbalance widened further in December as exports fell for the fifth consecutive month and imports crossed $6 billion for the first time this fiscal year. Adding to exporters’ challenges, the Federal Board of Revenue initiated scrutiny of exporters’ tax returns following changes in the export taxation regime, triggering strong criticism from the business community and prompting the FBR to issue a public clarification on its actions.
