Export slump

Export slump, rising imports push Pakistan’s monthly trade deficit up 25%

The numbers leave little room for comfort. Pakistan's merchandise exports fell by a staggering 20.4% in December, marking the fifth consecutive month of decline in the current fiscal year and the sharpest contraction so far. At $2.317 billion, export proceeds were well below last year's level. To treat this slump as a cyclical blip would be a serious misreading of the moment.

What is particularly troubling is the persistence of the downturn. Since August, exports have remained on a downward trajectory, barring a one-off uptick in July. Month after month, the contraction has deepened, culminating in December's steep fall. Yet, there is little evidence of urgency within policymaking circles. No serious stocktaking appears to have taken place to assess why exporters are losing ground so rapidly. The broader trade picture compounds the concern. Imports crossed the $6 billion mark in December for the first time this fiscal year, signalling that the shift towards trade normalisation and liberalisation has revived import demand faster than anticipated. This, when set against collapsing exports, has pushed the monthly trade deficit up by 25% to $3.7 billion. Pakistan's weak export base has long been the Achilles' heel of its external sector. In earlier years, this weakness was masked by generous foreign inflows that helped paper over structural deficiencies. Those cushions are no longer reliably available. While strong remittances and the State Bank's dollar purchases have, for now, helped finance the trade gap and shore up reserves, this strategy is neither cost-free nor sustainable. It is exerting a drag on growth.

Pakistan may have stepped back from the brink, but it has yet to pivot decisively towards an export-led growth model. That pivot requires hard reforms to lower the cost of doing business and diversify the export base beyond a narrow set of low-value products. Without such measures, the current recovery will remain fragile.