Alarm bells are ringing for Pakistan’s economy after a 20.4% export nosedive in December 2025, continuing a five-month skid that exposes glaring trade fragilities. State data highlights how external shocks and internal shortcomings are fueling a deficit nightmare.
Strained ties with bordering India and Afghanistan have shuttered trade gateways, while China-centric trade strategies burden with steep costs and delays.
Exports contracted sharply to $2.32 billion from $2.91 billion prior December, contrasting a 2% import uptick to $6.02 billion and a 24% deficit jump to $3.7 billion monthly. Root causes include product monotony, competitive erosion, and weak global integration.
First six months of FY 2025-26 saw exports fall 8.7% to $15.18 billion versus 11.3% import growth to $34.39 billion, with deficits soaring 35% to $19.2 billion. Decades-long export inertia has hobbled adaptation to import needs and peer competition.
Reliance on aid flows, diaspora funds, and loans has sustained balances temporarily, ignoring core export reforms. Current figures show these tactics unraveling into tangible crises.
To reverse course, Pakistan must prioritize innovation, market expansion, and policy overhauls. Without it, escalating deficits could precipitate reserve crises, higher borrowing costs, and prolonged recession.