ISLAMABAD: The Economic Survey 2025-26 has revealed that Pakistan’s net exports remained negative, underscoring the persistent need to strengthen export capacity and diversify the country’s export base.
According to the survey, trade openness—measured as the ratio of exports and imports to GDP—stood at around 30 percent, indicating significant potential for deeper integration into global markets.
The exchange rate remained largely stable during the fiscal year, recorded at Rs 280.65 per US dollar compared to Rs 279.35 last year, reflecting a marginal depreciation of just 0.5 percent.
The global trade environment remained challenging in 2025, primarily due to substantial tariff increases by the United States, which heightened trade restrictions and policy uncertainty.
Additional pressures emerged in February 2026 as escalating tensions in the Middle East triggered volatility in energy markets, increased shipping and insurance costs, and disrupted regional supply chains.
Despite these headwinds, Pakistan’s external sector demonstrated resilience. During July–March FY2026, the current account posted a surplus of USD 72 million, supported by strong remittance inflows, reduced primary income outflows, and improved financial account performance.
Workers’ remittances remained a key pillar, rising by 8.2 percent to USD 30.3 billion, largely due to policy and regulatory measures encouraging inflows through formal channels.
However, the merchandise trade deficit widened to USD 27.9 billion from USD 22.7 billion last year, driven by a 6.9 percent increase in imports amid recovering domestic economic activity. Export performance remained subdued, declining by 8 percent due to weak external demand and geopolitical disruptions affecting trade routes.
The services sector provided some relief, with the deficit narrowing to USD 2.1 billion from USD 2.3 billion, supported by robust growth in IT exports, which surged by 19.8 percent.
The primary income deficit also improved, declining by USD 364 million to USD 6.4 billion, mainly due to lower interest payments.
On the financing side, the financial account recorded a net inflow of USD 194 million, compared to a net outflow of USD 1.0 billion last year, primarily due to higher official disbursements.
Foreign exchange reserves increased to USD 21.8 billion by end-March 2026—comprising USD 16.4 billion held by the State Bank of Pakistan and USD 5.4 billion by commercial banks—helping maintain exchange rate stability at around Rs 281 per US dollar during the period.
Exports remained stagnant at approximately 9 percent of GDP, while imports stayed elevated at around 16 percent, largely driven by essential and energy-related purchases. The trade deficit widened further in the third quarter due to the Middle East crisis and rising oil import costs.
To address these imbalances, the government is pursuing structural reforms aimed at enhancing export competitiveness, diversifying export products, and rationalizing tariffs to curb imports.
The Survey noted that wholesale and retail trade grew by 3.71 percent, supported by improved output in agriculture and manufacturing, along with higher import volumes. The services sector maintained steady momentum, with growth reaching 4.18 percent in the third quarter, while wholesale and retail trade expanded by 4.13 percent during the same period.
Looking ahead, the outlook for global trade in 2026 remains uncertain due to ongoing tariff tensions and geopolitical risks, which are expected to slow goods trade. However, services trade is projected to remain relatively resilient, driven by digitalization and rising demand for technology-based services.
Growth in Pakistan’s major trading partners—including China, the United States, the United Kingdom, and the European Union—is expected to remain moderate, potentially weighing on demand for Pakistan’s exports. Nonetheless, continued expansion in IT and digitally delivered services presents an opportunity to offset pressures in the goods sector.
The widening trade deficit was largely attributed to a 7.8 percent increase in import payments during July–March FY2026, reflecting stronger demand for industrial inputs as economic activity picked up. Rising global oil prices further exacerbated the import bill, with Brent crude increasing from USD 62.7 per barrel in December 2025 to USD 103.7 in March 2026.
Meanwhile, goods exports declined by 5.8 percent, mainly due to reduced food exports—particularly rice—amid weak global demand, flood-related losses, and disruptions in Pak-Afghan trade following border tensions since October 2025.
Pakistan’s export of fish and fisheries products has seen consistent growth, reflecting rising global demand for seafood. Pakistan’s top buyers included China, Thailand, United Arab Emirates (UAE), Malaysia and Japan.
In July-March FY 2026, Pakistan exported a total of 200 thousand MT of fish and fisheries products earning approximately US USD 405.1 million in export revenue.
Encouragingly, the services account continued to provide a buffer, with exports growing by 17.2 percent, outpacing import growth of 10.7 percent. This improvement reflects the increasing role of IT and digitally enabled services in strengthening Pakistan’s external account.
Copyright Business Recorder, 2026
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