ISLAMABAD: Pakistan’s trade deficit with its nine neighboring countries expanded significantly by 47.55% in the first five months of the current fiscal year, reaching $4.474 billion, compared to $3.032 billion during the same period last year.
Trade analysts point to a sharp rise in imports from China and India as the primary factors contributing to the growing deficit. Notably, imports from China saw the largest increase, while Pakistan’s exports to China decreased during the period. Despite this, Pakistan saw an unexpected rise in exports to Afghanistan, Bangladesh, and Sri Lanka, which helped offset some of the losses from exports to China.
The widening deficit could present a significant challenge for policymakers. In the previous fiscal year (FY24), the trade deficit with these nine countries stood at $9.506 billion, up 49% from $6.382 billion in FY23.
While exports to Afghanistan, Bangladesh, and Sri Lanka showed an upward trend in the first five months of FY25, exports to other nations, especially China, continued to decline. According to the State Bank of Pakistan, the total value of exports to the nine countries — Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan, and the Maldives — increased by 5.99%, reaching $1.962 billion from $1.851 billion the previous year.
On the other hand, imports surged by 31.8%, reaching $6.436 billion in 5MFY25, up from $4.883 billion in the same period last year. Imports from China alone rose by 32.4%, amounting to $6.276 billion in 5MFY25, compared to $4.740 billion last year.
Pakistan’s exports to China, however, saw a decrease of 13.9%, dropping to $1.053 billion from $1.223 billion during the same period last year. Imports from India also rose by 6.19%, reaching $94.78 million in 5MFY25 from $88.91 million last year, while exports to India remained minimal.
In the case of Afghanistan, exports surged by 73.37%, reaching $406.67 million in 5MFY25 from $234.56 million last year. Imports from Afghanistan stood at $8.53 million, up from $3.18 million in FY24.
Exports to Bangladesh and Sri Lanka also showed notable increases, with exports to Bangladesh rising by 29.76% to $313.99 million, and exports to Sri Lanka surging by 25.3% to $183.89 million. However, trade with Bhutan remained stagnant, and there was no significant change in trade between Pakistan and Iran due to informal trade channels and smuggling activities along the Balochistan border.
The increasing trade deficit presents an ongoing concern for Pakistan’s economic stability as it navigates these complex trade dynamics with its neighboring countries.
