Pakistan’s trade imbalance with its neighbouring countries has expanded sharply in the early months of the current fiscal year, reflecting weakening regional exports and rising import dependence.
New figures from the State Bank of Pakistan show that the trade deficit with nine nearby countries climbed to over $6.2 billion during the first five months of FY2025-26, a steep jump compared to the same period last year.
The main reason behind this widening gap is a noticeable fall in exports to key regional partners. Shipments to China declined, while trade with Afghanistan nearly collapsed after the suspension of cross-border trade in October 2025.
This disruption significantly reduced Pakistan’s access to an important nearby market, hurting exporters who rely on short-distance trade routes.
Although exports to India recorded a slight improvement, their overall value remained very small and did little to offset losses elsewhere.
At the same time, exports to Bangladesh and Sri Lanka also moved downward, adding further pressure on Pakistan’s regional trade performance.
On the import front, Pakistan continued to buy more goods from neighbouring countries, especially China.
Imports from China made up the bulk of regional purchases and increased notably, underlining Pakistan’s strong reliance on Chinese products for industry and consumption. Imports from India, however, declined during the period, reflecting ongoing trade limitations between the two countries.
Looking at the broader picture, the full-year trade deficit with neighbouring states has also risen sharply, highlighting a growing imbalance in regional trade flows.
Economists warn that unless Pakistan boosts exports, restores disrupted trade routes, and diversifies its regional markets, the pressure on foreign exchange reserves could intensify in the coming months.
Strengthening regional trade ties and supporting exporters may now be critical to narrowing the gap and stabilising Pakistan’s external trade position.