Pakistan-Afghanistan trade down 6% in FY26's first quarter

Bilateral trade between Pakistan and Afghanistan declined by 6% in the first quarter of the 2025-26 fiscal year, reflecting shifting trade dynamics in South Asia as Pakistan’s exports to its landlocked neighbor sharply dropped, while Afghan exports to Pakistan gained traction.

According to trade data released by Pakistan’s Federal Board of Revenue (FBR), total bilateral trade between July and September stood at $475 million, down from $502 million during the same period last year.

The contraction is largely attributed to a 15% drop in Pakistan’s exports, which fell from $320 million to $271 million, suggesting either weakening demand for Pakistani goods in Afghanistan or ongoing supply-side constraints.

In contrast, Afghan exports to Pakistan rose by 12%, reaching $203 million, up from $182 million. This marks a continued expansion of Afghan market presence in Pakistan, effectively narrowing the trade surplus that traditionally favored Islamabad.

Year-on-year trade data for September indicates a sharper decline, with bilateral trade falling 13% to $177 million compared to the same month in 2024. This drop was driven by a 36% decline in Pakistani exports, though partially offset by a 26% increase in imports from Afghanistan.

Interestingly, on a month-on-month basis, total trade rose 19%, thanks to a 56% surge in imports from Afghanistan, even as Pakistani exports dipped 8% during the same period.

The previous fiscal year painted a much brighter picture. In FY25, Pakistan-Afghanistan trade surged 25% year-on-year to $1.998 billion, up from $1.603 billion in FY24. The growth was primarily driven by a 31% increase in Pakistani exports, which climbed to $1.391 billion, reflecting robust cross-border demand.

Afghanistan’s exports to Pakistan also grew by 13%, rising to $607 million. The now-reversing trend highlights the impact of regional economic conditions, border policies, and possibly currency fluctuations that have since altered trade flows.

Amid weakening bilateral trade, Afghanistan’s transit trade through Pakistan saw strong performance in the July-September period, increasing 16% year-on-year to $314 million.

Afghan goods moving through Pakistan to global markets rose 16% to $307.8 million, while reverse transit (imports into Afghanistan through Pakistan) jumped 33% to $6.2 million.

In September, transit trade was up 33% year-on-year, totaling $104.3 million, although it recorded a 4% month on month decline due to logistical and operational fluctuations.