Pakistan's trade deficit shrinks to 11-year low in four months of FY25

Pakistan's trade gap decreased by 6% to $6.97 billion in the first four months of the current fiscal year, the lowest level in 11 years since FY14.

This improvement is mainly due to a 14% rise in exports, though imports also increased by 5% compared to the same period last year.

In October, Pakistan's trade deficit narrowed to $1.49 billion, a 31% decrease from $2.174 billion in the same month last year.

This was driven by a 10.64% surge in exports, reaching $2.97 billion compared to $2.68 billion in October of the previous year.

Imports declined by 8.02%, totaling $4.47 billion down from $4.86 billion in the same period last year, according to the Pakistan Bureau of Statistics (PBS).

A report from the State Bank of Pakistan (SBP) highlighted that since 2010, Pakistan's exports have averaged around 8% of GDP but have been declining in the global market compared to peer countries.

This trend has made Pakistan more susceptible to balance of payment issues, increasing foreign debt, and exchange rate volatility.

The SBP pointed out that Pakistan's anti-export bias and protectionist measures encourage resources to be allocated away from exports to domestic markets, resulting in inefficiencies and high costs.

This protectionism shields local producers from competition, fostering rent-seeking behavior and disconnecting Pakistan from the global value chain, leading to an inward-oriented economy.

The SBP emphasized the need for institutional reforms to streamline regulations and procedures. These reforms include reducing overlapping organizational entities, revitalizing e-office suites in ministries, implementing public finance management, and strengthening secretaries' committees for ministerial coordination.

Furthermore, the government needs to enhance quality infrastructure by obtaining global equivalence and accrediting domestic institutions with international bodies. Digitizing government services, such as issuing licenses and approvals, will reduce the cost of doing business and foster a competitive export sector.