Widening Trade Deficit Poses Threat to Pakistan’s Economic Stability

By Dr. Ansab Ali — Lahore, Pakistan
LAHORE: The All Pakistan Business Forum (APBF) has raised serious concerns over Pakistan’s rapidly widening trade deficit, calling for urgent government intervention to revive exports and rein in unsustainable import growth as pressures on the country’s external sector intensify.
Citing data from the Pakistan Bureau of Statistics (PBS), APBF President Syed Maaz Mahmood said the trade deficit expanded sharply in December 2025 to USD 3.7 billion, nearly 24 percent higher than USD 2.99 billion recorded in the same month last year. Exports fell to USD 2.32 billion, marking a year-on-year decline of 20.4 percent, while imports rose to USD 6.02 billion during the period.
The cumulative trade deficit for the first six months of the current fiscal year reached USD 19.20 billion, representing an increase of approximately 35 percent compared to the corresponding period last year.
Speaking to the media, Syed Maaz Mahmood described the persistent trade imbalance as a “serious threat to macroeconomic stability,” warning that the growing gap between domestic output and foreign exchange earnings was placing significant strain on Pakistan’s external accounts and foreign currency reserves.
APBF Chairman Ibrahim Qureshi said the expanding deficit was being driven by a combination of weakening export performance and rising imports, particularly of non-essential and luxury goods. “A trade deficit of this magnitude erodes foreign exchange reserves, weakens the national currency and undermines investor confidence,” he said.
According to APBF, merchandise exports continue to struggle amid sluggish global demand, declining competitiveness and long-standing structural challenges in key sectors, particularly textiles, Pakistan’s largest source of export earnings. At the same time, rising domestic demand for imported machinery, consumer goods and intermediate inputs has further widened the trade gap.
Mahmood urged policymakers to prioritise export recovery through targeted incentives, diversification of export markets and measures to reduce production costs for local manufacturers. He also called for stricter scrutiny of imports, especially in sectors where domestic industries are capable of meeting local demand.
“We need a balanced trade policy that supports domestic production and export-led growth while carefully managing unnecessary imports,” he said, warning that without structural reforms, the trade deficit could continue to widen in the coming months.
APBF also cautioned that an unchecked trade deficit could have broader economic consequences, including pressure on the rupee, reduced industrial output, job losses and slower economic growth. The forum reiterated the need for a comprehensive national strategy to enhance export competitiveness, including improvements in logistics, lower energy costs and better access to financing for exporters.
Economic analysts have echoed these concerns, noting that the sharp decline in exports alongside rising imports poses significant risks to Pakistan’s overall economic stability unless addressed through coordinated and sustained policy measures