Widening trade deficit raises pressure on Pakistan’s external account: report

A widening trade deficit is raising concerns over Pakistan’s balance of payments position as the fiscal year draws to a close and import-related payments accelerate ahead of June 30, Dawn reported, citing market experts and industry officials.

Financial analysts warned that a trade gap of up to $32 billion could increase pressure on foreign exchange reserves, particularly if global oil prices remain elevated amid tensions in the Gulf region.

Some experts linked the surge in imports to what they described as a “managed exchange rate”, arguing that a relatively stable rupee had made imports cheaper and encouraged higher purchases of luxury goods and vehicles.

Import data showed that purchases of completely built-up (CBU) vehicles rose to $317 million during the first 10 months of FY26, compared to $76 million in the same period last year. 

Similarly, imports of completely knocked down (CKD) kits increased to $1.37 billion during July-April FY26, up from $780 million a year earlier.

The rupee, which traded near ₨306 against the US dollar in the interbank market in 2023, was brought back to around ₨286 in October that year and has since remained largely within the ₨277-₨282 range.

Since the start of FY26, the Pakistani rupee has gradually appreciated and is currently trading below ₨280 against the dollar.

Market participants said some cryptocurrency transactions were attracting dollars at rates as high as ₨292, which they viewed as an indication that the rupee could still weaken further.

Analysts compared the situation with India, where the rupee has depreciated by around 10% over the last year and recently touched a record low of 95.40 against the dollar.

According to State Bank of Pakistan data, foreign investors withdrew more funds from Pakistan’s equity market than they brought in during the first 10 months of FY26.

The data showed equity inflows stood at $247 million, while outflows reached $884 million during the period.

Foreign investment in domestic bonds also declined sharply, with around 94% of foreign holdings exiting the market, according to experts.

Meanwhile, official trade data showed Pakistan’s petroleum import bill during July-April FY26 stood at $10.45 billion, compared to $11.25 billion in the corresponding period of last fiscal year.

Financial experts said Pakistan could still face a current account deficit despite remittance inflows remaining close to $40 billion, adding that sustained import growth could weigh on foreign exchange reserves in the coming months.