By Staff Reporter
KARACHI: Pakistan’s trade deficit swelled 17.5% to $34.76 billion in the first eleven months of fiscal year 2025-26, as a persistent slide in export earnings collided with rising import costs, deepening strains on an economy still navigating a fragile external-sector recovery.
Exports fell 5.6% to $27.9 billion in the July-May period, down from $29.6 billion a year earlier, according to data released Wednesday by the Pakistan Bureau of Statistics. Imports rose 5.9% to $62.7 billion over the same period, widening the deficit from $29.6 billion in the comparable stretch of FY25.
The deterioration marks a sharp reversal from the previous fiscal year, when exports climbed 4.7% to $32.1 billion and the trade gap widened by a more contained 9% to $26.3 billion.
A Year of Negative Prints
The export trajectory over the fiscal year has been almost uniformly bleak. After an outlier 16.4% year-on-year jump in July, growth turned negative in August and remained so for most of the period — with the steepest declines recorded in December, when proceeds dropped 20.4%, and November, when they fell 14.5%. October and September posted contractions of 4.5% and 3.9%, respectively.
A brief respite came in January, when exports eked out 3.3% growth, but February brought a renewed 8.8% decline and March saw the sharpest monthly fall in the second half of the year at 14.4%. April rebounded sharply, rising 14% year-on-year, though exporters and analysts cautioned against reading too much into a single month’s number.
May offered modest encouragement. Exports reached $2.71 billion, up 1.3% from $2.67 billion in May 2025. On a month-on-month basis, proceeds rose 9.6%.
The monthly trade deficit narrowed 13.7% in May to $2.58 billion from $2.99 billion a year earlier, aided partly by a 6.6% drop in the monthly import bill to $5.29 billion. Month-on-month, imports fell 21.5% in May.
Gulf War Weighs on Shipping Costs and Regional Demand
Trade analysts point to the Middle East conflict as a structural headwind that has compounded the sector’s underlying cost disadvantages. Disruptions in and around the Strait of Hormuz have pushed up freight rates, extended delivery times, and introduced supply-chain uncertainty that exporters say is difficult to price or plan around.
The export sector began feeling pressure from the conflict from February onward, and analysts warn that a prolonged Gulf war could erode competitiveness further — not only through higher logistics costs but by depressing demand in regional markets that are significant buyers of Pakistani goods.
US Tariff Uncertainty Adds to the Pressure
A separate and more immediate concern for the export community centers on Washington. The US Trade Representative has proposed to the Trump administration that a 10% additional duty be imposed on imports from a broad group of countries including Pakistan, Canada, Bangladesh, Indonesia, Mexico, the United Kingdom, and the European Union.
The proposal comes after the US Supreme Court struck down the administration’s earlier sweeping tariff regime in February, having found against importers who challenged the measures in court. President Trump subsequently reimposed a 10% additional duty on a range of countries, including Pakistan, and exporters now face the prospect of that levy being renewed when it expires on July 24.
Pakistani textile exporters already face a 16.5% duty on shipments to the United States, which — combined with the additional 10% levy — brings the total tariff burden on their products to 26.5%.
“Our products are already facing 26.5% total duties in the United States. This makes our products costly in the US market,” said Javed Bilwani, a textile exporter and former president of the Karachi Chamber of Commerce.
The concern is amplified by Pakistan’s underlying cost structure. High energy prices, elevated interest rates, and the cost of imported inputs have left Pakistani exporters at a competitive disadvantage relative to regional peers, making any additional duty burden more consequential than it might be for lower-cost producers.
“Our products are already the costliest in the region as competitors in other countries have the advantage of lower cost of production,” said Amir Aziz, a textile exporter. “If the 10% duty continues in the future, the situation would hurt Pakistan.”
Aziz added that if the additional duty is not renewed at month’s end, Pakistani exporters could benefit from a meaningful price differential in the US market relative to goods from countries that remain subject to the levy.
US Trade Balance Still Favours Pakistan — For Now
Despite the anxiety over tariffs, Pakistan’s trade relationship with the United States remains in Islamabad’s favour. State Bank data show exports to the US reached $5.12 billion in July-April of FY26, modestly above the $5 billion recorded in the same period of FY25. Exports for the full FY25 year rose to $6.03 billion from $5.44 billion in FY24.
US imports into Pakistan, while growing, remain well below half of Pakistani export volumes. In the July-April FY26 period, imports from the US totalled $2.54 billion, up from $1.9 billion a year earlier. Full-year imports from the US were $2.35 billion in FY25 and $1.88 billion in FY24.
Exporters say they are not anticipating a strong recovery in the near term. The combination of geopolitical disruption, tariff uncertainty, and structural cost pressures has left the sector in a holding pattern — waiting for clarity on Washington’s trade policy while absorbing the operational fallout from an extended regional conflict.
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