Pakistan's merchandise trade deficit widened sharply during FY2025-26, with the country's international goods trade gap increasing 21.57% to $39.47 billion, as declining exports and rising imports placed renewed pressure on the external sector, according to data released by the Pakistan Bureau of Statistics (PBS).

During the fiscal year ended June 2026, exports declined 5.97% to $30.13 billion, compared with $32.04 billion in the previous year. In contrast, imports increased 7.9% to $69.60 billion, significantly widening the gap between Pakistan's export earnings and import payments.

The latest figures extend Pakistan's long-standing trade imbalance, with the country continuing to record merchandise trade deficits every year since 2003. Analysts noted that the trend reflects structural weaknesses in the economy rather than short-term fluctuations, with export growth remaining constrained while import demand continues to expand.

Economists observed that Pakistan's export basket remains concentrated in a limited range of products and markets, while imports are increasingly driven by consumer goods instead of capital equipment and industrial inputs. They argue that the lack of export diversification and limited progress in import substitution continue to weigh on the country's external accounts.

The deterioration was particularly evident during June 2026, when the monthly trade deficit surged 57.1% year-on-year to $4.53 billion. Monthly exports fell 9.6% to $2.24 billion, while imports jumped 26.3% to $6.77 billion, reflecting stronger import demand alongside weaker export performance.

Despite the widening merchandise trade gap, the services sector provided some support to the external account. During the first eleven months of FY2025-26 (July-May), the services trade deficit narrowed 24.1% to $2.0 billion as services exports increased 17.4% to $9.1 billion, outpacing the 6.8% rise in services imports, which reached $11.1 billion.

In May 2026, the services account posted a $30.46 million surplus, reversing a $168.95 million deficit recorded in the same month last year. The improvement was driven by a 16% increase in services exports to $838.3 million, while services imports declined 9.4% to $807.8 million.

Analysts attributed the resilience of the services sector primarily to continued growth in information technology (IT) and other knowledge-based exports. However, they cautioned that the sector remains relatively small compared with the merchandise trade deficit and cannot fully offset the growing imbalance in goods trade.

The widening trade deficit is expected to keep pressure on Pakistan's foreign exchange reserves, exchange rate stability, and external financing requirements, reinforcing the need for structural reforms aimed at expanding exports, improving industrial competitiveness, and reducing dependence on imported consumer goods.