Pakistan’s Regional Trade Deficit Widens Sharply as Exports Struggle

Pakistan’s trade imbalance with its nine regional neighbors has expanded sharply in the first half of the fiscal year 2025-2026, reaching a deficit of $7.683 billion, a jump of 44.42% from the same period of last year. According to a recent report, exports to neighboring countries declined by 18.56% ,   falling to   $ 1.965 billion between July and December. Imports, meanwhile, surged by 24.76%, totaling $9.648 billion.

The significant drop in exports was led by reduced shipments to China, Afghanistan, and Bangladesh, with a nearly complete halt in trade with Afghanistan since October 10, 2025.

In FY25, the deficit had already widened by 29.42%, underscoring persistent challenges in Pakistan’s regional trade strategy. Experts point to structural issues, including uncompetitive industries, high production costs, and inadequate trade facilitation, as key reasons behind the declining export performance.

Prime Minister Shehbaz Sharif has recently emphasized export-led growth, directing authorities to devise a plan to boost agricultural exports and streamline tax refunds for exporters. He also reaffirmed Pakistan’s commitment to leveraging the EU’s GSP+ status to enhance trade with European markets.