Pakistan's trade deficit widens by 18% in January

Pakistan's trade deficit for January increased by 18% to $2.313 billion compared with the same month last year, according to a report by the Pakistan Bureau of Statistics released on Monday.

Imports rose by 10% to $5.2 billion because of a more flexible import regime. Initially, strict restrictions were implemented to curb imports in response to economic pressures, but these measures have since been relaxed.

Moreover, the central bank has reduced the interest rates from 22% last year to 12% given lower inflation numbers. Exports saw a 5% increase to $2.9 billion in January.

The report also highlighted a minor improvement in the trade deficit from the previous month, narrowing by 5.18%.

Exports in January increased by 0.63% to $2.920 billion, up from $2.911 billion in December. Conversely, imports fell by 2.03% to $5.233 billion, compared to $5.358 billion in the previous month.

On yearly basis, exports in January rose by 4.08%, while imports increased by 9.51%. This resulted in a 17.23% widening of the trade deficit compared to the same month last year, indicating ongoing challenges in balancing trade.

Cumulative data for the fiscal year (July to January) showed a 7.06% increase in exports and a 4.13% rise in imports compared to the same period in the previous year. The cumulative trade deficit saw a slight uptick of 0.15%.

Analysts suggest that the slight narrowing of the trade deficit in January might provide some relief to policymakers, though the overall trade imbalance remains a concern.

Despite the challenges posed by the global economic climate, the government’s strategic initiatives aimed at enhancing export-oriented sectors, along with declining oil prices, offer a glimmer of hope for improving the trade balance.

As per the latest IMF report, the authorities are working to further liberalize trade policies by reducing tariffs and simplifying import/export documentation. These reforms are part of the National Tariff Policy (2025-2029) and are aimed at boosting competitiveness, facilitating private sector growth, and promoting export-led economic development.