Pakistan’s trade deficit widened 22% to $39.5 billion in the fiscal year ended June, according to official figures released last week. According to data from the Pakistan Bureau of Statistics (PBS), the country’s imports increased 8% to $69.6 billion, while exports declined 6% to $30.1 billion in the fiscal year 2025-26. As domestic demand and growth are recovering, imports are rising much faster than exports, causing the trade gap to widen.
According to experts, plunging exports pose a critical threat to the country’s economy, especially external account stability, and foreign exchange reserves. For nearly a decade, Pakistan’s export sector has been running in place. While regional peers Bangladesh and Vietnam have used export-led growth to transform their economies, Pakistan’s exports remain trapped in a narrow band of $25–32 billion a year — a stagnation that economists say reflects deep structural rot rather than bad luck.
According to the PBS, exports for fiscal year 2024–25 came in at roughly $31.75 billion, up modestly from $30.76 billion the previous year — a gain of about $1 billion. That followed a rough patch: exports had peaked at an all-time high of $31.78 billion in FY22, only to collapse to $27.54 billion in FY23 as import controls, energy shortages, and political instability rattled industry. Government targets have consistently proven over-optimistic; the FY25 goal of $32.3 billion was narrowly missed even as officials had hoped to eventually reach $100 billion by FY28 — a target the IMF itself views as far-fetched, projecting closer to $39 billion by then. Textiles continue to dominate, accounting for over half of total export earnings, but even this “backbone” sector saw its share slip from 56 percent to about 54 percent of the total, according to trade data compiled by analysts.
The contrast with regional peers is stark. Bangladesh, a country with a smaller population and once written off as an economic laggard, earned over $48 billion in exports in FY2024–25 alone — a rise of nearly 9 percent — with ready-made garments contributing $39 billion of that total, according to Bangladesh’s Export Promotion Bureau. Bangladesh’s calendar-year exports had already crossed $50 billion in 2024, on the back of the same textile sector that Pakistan also depends on.
Vietnam’s numbers are even more dramatic. Vietnamese exports hit a record $405.53 billion in 2024, up 14.3 percent year-on-year. Vietnam crossed $100 billion in exports back in 2012, doubled that by 2017, and has kept compounding growth ever since by riding waves of foreign direct investment, aggressive trade-agreement diplomacy, and diversification into electronics, machinery, and footwear alongside textiles. The comparison is telling: Bangladesh built a $50 billion economy almost entirely on one sector executed well; Vietnam built a $400 billion one by diversifying aggressively and embedding itself in global supply chains. Pakistan has done neither.
Pakistani exporters routinely cite electricity and gas tariffs among the highest in the region, compounded by unpredictable outages that Vietnamese and Bangladeshi factories simply don’t face at the same scale. An overvalued, unstable exchange rate regime. Years of currency mismanagement left Pakistani goods periodically overpriced in dollar terms, only correcting through disruptive devaluations rather than steady, competitive positioning.
Pakistan’s exports have a narrow product base. Textiles, rice, and a handful of other categories dominate Pakistani exports, leaving the country exposed to price swings in a few commodities. Vietnam’s success rests on having 37 export categories worth over $1 billion each; Pakistan has nowhere near that breadth.
Vietnam attracted enormous foreign direct investment from firms like Samsung, Intel, and Apple’s suppliers looking to diversify away from China. Pakistan, hampered by security perceptions, inconsistent policy, and bureaucratic friction, has captured almost none of this “China Plus One” relocation wave.
Another problem is policy inconsistency and high cost of doing business. Frequent changes in tax regimes, import-substitution instincts that raise input costs for exporters, and a documentation-heavy regulatory environment discourage both local expansion and foreign investment. Investors weighing Pakistan against Bangladesh or Vietnam consistently cite governance unpredictability as a deciding factor against expansion. Equally importantly, Vietnam’s exporters benefit from sweeping free trade deals — the EVFTA, RCEP, CPTPP — giving preferential access to major markets. Pakistan’s trade diplomacy has lagged far behind.
What is the way forward? Economists and industry leaders broadly agree on the prescription, even if implementation has proven elusive:
• Fix energy pricing for export-oriented industry through dedicated, competitively priced supply, rather than blanket subsidies that distort the broader economy.
• Diversify beyond textiles into IT services, pharmaceuticals, engineering goods, and agro-processing, where Pakistan has latent but underused capacity.
• Pursue an aggressive trade-agreement strategy, seeking preferential access to markets in the Gulf, ASEAN, and beyond, mirroring Vietnam’s playbook.
• Stabilize macroeconomic policy, giving exporters predictability on exchange rates and input costs rather than reactive, IMF-driven adjustments.
• Pursue foreign direct investment aggressively by simplifying regulation, improving security perceptions, and offering the kind of long-term policy consistency that manufacturing relocation requires.
• Support SMEs, which industry leaders note are being left behind even as large factories post export gains — a warning sign that current growth is neither broad-based nor sustainable.
Until these structural issues are addressed, Pakistan’s export sector looks likely to keep posting modest single-digit gains, but nowhere close to the scale needed to narrow the trade deficit or match the trajectory of its regional peers.