The deficit in Pakistan’s merchandise trade grew by 19.7 pc to $3.877 billion in October 2026 due to the faster pace of growth in imports relative to exports. Although there was an improvement in export earnings, Pakistan seems to be quite reliant on imported products and its export industry is failing to generate sufficient growth to reduce the trade gap.

As per the Pakistan Bureau of Statistics (PBS), exports rose only by 2.8pc to reach $2.93 billion from $2.85 billion in the corresponding period in 2025. On the other hand, imports went up by 11.8pc to stand at $6.81 billion in comparison to $6.1 billion in the previous year. Therefore, the trade deficit rose to $3.877 billion from $3.24 billion in October 2025. This shows that the value of imports was more than double of that of exports.

The decline was also reflected in the numbers for the four months of the present fiscal year. In July-October FY2026-27, the merchandise trade deficit grew by 15.97pc to reach $14.63 billion, against $12.6 billion in the same period last year. Exports during the four months were up by 8.5pc to reach $11.34 billion, while the imports increased by 12.6pc to reach $25.96 billion. While it is true that exports growth was better than October alone, it was still inadequate to match the rate at which imports grew. This means that the Pakistani exports industry has yet to grow enough to be able to match the needs of its economy for imported items.

The latest statistics have come after a sharp decline in merchandise trade in FY2025-26, where the trade deficit increased by 21.6pc to $39.47 billion. Exports fell by 6pc to $30.13 billion, whereas imports increased by 7.9pc to $69.6 billion. The latest numbers reveal the vulnerabilities that continue to affect the country’s performance in external trade. It is important for the country to have a strong base of exports so as to pay for imports, debts, and reliance on external loans. The services sector has also faced a tough situation, but at least it showed some positive trends in export performance. As per PBS data, Pakistan’s services trade deficit jumped by 84.3pc to $282.7 million in September 2026 from $153.4 million in September 2025.

Services exports were up by 15.35pc to $930 million as compared to $806 million during the previous year. Yet services imports grew by a larger proportion of 26.4pc to $1.21 billion as against $959 million, leading to a large gap in the monthly services deficit. The growing services imports imply that merely higher export proceeds do not seem sufficient to improve the sectoral performance. The services trade deficit during the first quarter of FY2026-27 July to September registered a small decline of 0.33pc to $832 million as compared with $834.9 million during the same period in the previous year. Services exports witnessed a significant rise of 22.6pc to $2.7 billion, while services imports grew by 16.3pc to $3.55 billion.

The performance of services exports, especially those of information technology and other professional services, can provide a chance for Pakistan to diversify the channels of foreign exchange income. This is dependent, however, on consistency of policies, investment in ICT, enhanced internet connection, a skilled labor force and better international market access. A more developed service sector can be used to alleviate Pakistan’s heavy dependence on conventional merchandise exports; however, the country is unable to make up for poor manufacturing capabilities through development of its service sector alone.

The constant surplus in Pakistan’s merchandise trade is an indication of the lack of diversification of its export portfolio. Pakistan’s exports of textile remain dominant and thus make the country prone to global changes in demand, competition and cost of production.

Industries like engineering goods, pharmaceuticals, processed foods, IT, and high-value agriculture have plenty of room to grow, yet they’re still falling short of their potential. Everyday hurdles—from steep energy costs and expensive loans to tax headaches, shifting regulations, and weak infrastructure—continue to hold businesses back from competing effectively.

Export-oriented companies require cheap and stable sources of electricity and gas, modern equipment, and cheap credits and stable policies. Constant changes in the policies of the government and delays in tax payments also cause uncertainties and prevent investments. On the other hand, increasing costs of imports cannot be solved administratively. The bulk of imports comprises industrial raw materials, machinery, chemical materials, and intermediate goods used by domestic producers. It will be possible to cut down imports, but not without creating certain difficulties in production and exporting. The solution lies in developing competitive domestic industries able to satisfy more domestic needs.

More emphasis should be paid to agriculture as part of any policy intended to improve the trade balance. Pakistan has all possibilities to raise the exports of processed food products, fruits, vegetables, rice and other agricultural products. But weak warehousing and processing facilities, poor transportation system and lack of quality standards hinder the access to international markets. Modernization of agriculture and development of food processing, packaging and cold chain facilities will allow increasing the value of the exports of agricultural products.

In turn, the government should implement a broad export-oriented growth strategy instead of using temporary solutions to overcome the trade deficit. The strategy should provide value addition, diversification of export markets, increased productivity and investments in export-oriented industries. At the same time, more coordination is required between the federal and provincial governments, business community and financial organizations.

Pakistan’s most recent trade statistics act as a reminder that no matter how much improvement may be shown in its foreign exchange reserves and foreign borrowings in the short term, all of this is no substitute for a robust economic performance. As long as the pace of exports does not increase, and the country acquires the ability to satisfy more of its imports from domestic manufacturing, the trade deficit will keep putting pressure on foreign exchange reserves and make Pakistan more dependent on foreign borrowings.