Pakistan’s Trade Deficit Widens 18% to $7.1 Billion in Two Months

Pakistan’s trade deficit widened by more than 18 per cent during the first two months of the 2026-27 fiscal year, reflecting growing pressure from a higher import bill.

According to data released by the Pakistan Bureau of Statistics (PBS), the trade deficit reached $7.1 billion during July-August FY27. The gap stood at $6.03 billion during the same period last year.

The latest figures show that imports are growing faster than exports. As a result, the widening gap could increase pressure on Pakistan’s external financing position.

The country already faces significant debt obligations. Pakistan needs to service more than $26 billion in external debt during the current fiscal year, adding to concerns over foreign exchange requirements.

Imports Rise Faster Than Exports

Pakistan’s imports increased by 13 per cent during the first two months of FY27.

The import bill reached $12.58 billion, compared with $11.13 billion during July-August FY26. Meanwhile, exports rose by 7 per cent to $5.46 billion from $5.10 billion a year earlier.

The difference between the two growth rates has therefore pushed the trade deficit higher.

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Higher oil costs and increased prices of other imports have also added to the pressure. In particular, food and energy costs have faced additional challenges amid instability linked to the Gulf conflict.

The trend mirrors the previous fiscal year, when Pakistan recorded a trade deficit of around $39.5 billion.

August Shows Monthly Improvement

On a monthly basis, however, the situation showed some improvement.

Pakistan’s trade deficit narrowed by 19.7 per cent in August to $3.17 billion. The gap had reached $3.95 billion in July.

Imports also declined sharply during the month. They fell by 17.7 per cent to $5.68 billion in August from $6.89 billion in July.

Exports followed the same direction. They dropped by 15 per cent to $2.51 billion, compared with $2.95 billion in July.

Despite the monthly improvement, the August trade deficit remained 10.4 per cent higher than it was a year earlier.

Remittances Remain Crucial

Pakistan’s external position has benefited significantly from strong remittance inflows.

During FY26, the country recorded a current account deficit of only $139 million. However, that relatively small deficit came alongside unprecedented remittance inflows of $41.5 billion.

The previous year’s trade deficit stood at around $39.5 billion. Therefore, the trade gap nearly consumed the value of annual remittances.

This dependence highlights the importance of controlling the import bill while expanding exports. At the same time, sustained remittance growth remains an important source of foreign exchange for the economy.

External Debt Adds to Pressure

The widening trade deficit comes at a difficult time for Pakistan’s external financing position.

The country faces more than $26 billion in external debt servicing requirements during FY27. Consequently, higher import payments could increase demand for foreign currency.

A persistent gap between imports and exports can also put pressure on the balance of payments. Moreover, any increase in global energy prices could further raise Pakistan’s import costs.

Policymakers will therefore face pressure to maintain adequate foreign exchange reserves while supporting economic activity.

Export Growth Needs to Accelerate

Pakistan’s exports recorded growth during the first two months of FY27. However, the 7 per cent increase remained well below the 13 per cent growth in imports.

The August figures also showed weakness on both sides of external trade. While imports declined during the month, exports fell at the same time.

For a sustainable improvement, export growth needs to remain stronger over the coming months. In addition, Pakistan needs to limit unnecessary import growth and improve the competitiveness of its export industries.

The latest PBS data underline the challenge facing the economy. Unless export growth catches up with imports, the widening trade gap could continue to place pressure on Pakistan’s external financing needs.