By Staff Reporter
ISLAMABAD: Pakistan’s merchandise trade deficit widened 16% to $14.6 billion in the first four months of the fiscal year, a gap that may keep the country dependent on foreign creditors for longer than the government has planned.
Imports reached about $26 billion from July through October, up 12.6% from a year earlier, while exports rose 8.5% to $11.3 billion, the Pakistan Bureau of Statistics said Friday. The shortfall was about $2 billion wider than in the same period last year. Imports have averaged roughly $6.5 billion a month, against exports of about $2.8 billion.
October alone brought a deficit of $3.88 billion, 19.7% more than a year earlier. Exports edged up 2.8% to $2.93 billion, while imports rose 11.8% to $6.81 billion, more than double the value of shipments abroad. From September, exports were flat near $2.9 billion, imports gained 5.7% and the monthly gap grew 10.3%, or $364 million.
The figures came two days after Finance Minister Muhammad Aurangzeb said Saudi Arabia had extended its additional $3 billion deposit for what he called a “reasonable period”. Riyadh had already rolled a separate $5 billion deposit with the central bank forward to 2028.
Finance Secretary Imdadullah Bosal told a parliamentary committee that external debt repayments are estimated at $21.5 billion this fiscal year, and that the government will seek rollovers of $10.5 billion in bilateral and commercial debt. Beyond those, officials are continuing to look for new foreign loans to build reserves, which themselves rest on foreign borrowing and the State Bank of Pakistan’s purchases of dollars in the domestic market. State Bank holdings stood at about $21.5 billion in mid-October. Pakistan raised $3 billion from an international bond sale in the first week of September.
Prime Minister Shehbaz Sharif has promised that the country’s 25th International Monetary Fund program, which ends next September, will be its last. The Fund and Pakistani authorities reached a staff-level agreement last month on the latest reviews, clearing the way for another $1.21 billion. Aurangzeb said the IMF board is due to take up the matter in December. The pledge faces its real test before the next general elections.
The import outlook is not helping. The central bank has projected imports of $71 billion for the current fiscal year, driven by higher energy bills, after $69.6 billion last year. Four months in, the pace is running ahead of that. The war involving Iran, which began February 28 with US and Israeli strikes, lifted energy prices, and Pakistan is especially exposed because of its reliance on imported fuel. Sharif said in April that the weekly oil bill had reached $800 million.
Exports have not responded to the government’s efforts. They have traditionally hovered between $2.5 billion and $3 billion a month, and even a Rs100 devaluation against the dollar failed to provide a significant lift. The budget retains Rs88 billion in subsidies for cheaper loans, mostly for large exporters. The rupee strengthened by one paisa to Rs276.66 per dollar on Friday, according to the central bank.
The government projects goods exports of $34 billion this fiscal year, up from about $30.1 billion last year, when shipments fell 6%. At that pace the country would miss its 2029 target of $60 billion. Planning Minister Ahsan Iqbal has said reaching that level is a prerequisite for avoiding any future IMF program.
The trade liberalisation policy has also fallen short. The Commerce Ministry and the World Bank had forecast a 14% rise in exports and only a 7% rise in imports under the policy; last year exports fell while imports rose 7.9%. The merchandise deficit for fiscal 2025-26 widened 21.6% to $39.47 billion.
One reason for the weak export performance is the government’s preference for large industries, unlike many economies where small and midsize enterprises drive shipments abroad. Sharif has recently turned his attention to SME financing, but the meetings have yet to deliver cheaper credit or other benefits of the kind available to large exporters.
Border closures add to the strain. This week the National Assembly Standing Committee on Finance voiced concern about the effect on exports of shutting three international borders for security reasons. Minister of State for Finance Bilal Kayani agreed there would be an impact, but said the Afghan border had to be closed on security grounds. Lawmaker Mirza Ikhtiar Baig said at a Wednesday session organized by the Sustainable Development Policy Institute that the only open land route is through China. Officials told a parliamentary panel in July that the Afghan border closure had cost Pakistan $1.1 billion in exports, while the Middle East conflict had cut overseas shipments by about $2 billion.
The services account was mixed. The services trade deficit jumped 84.3% in September to $282.7 million, as imports rose 26.4% to $1.21 billion and exports gained 15.35% to $930 million. For the July-September quarter, the services deficit was little changed at $832 million, with exports up 22.6% to $2.7 billion and imports up 16.3% to $3.55 billion.
Aurangzeb has said the government wants to replace short-term, costly borrowing with debt maturing in five to 10 years, and is targeting a sovereign rating upgrade to B+ by the end of this fiscal year or early next. The trade figures suggest the harder job is narrowing the gap that keeps creating the need.
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