Trade deficit surge
As the federal government prepares to unveil the FY27 budget, the latest trade figures offer a sobering reminder that the country's economic vulnerabilities remain deeply entrenched. During the first 11 months of FY26, Pakistan's trade deficit widened by 17.48% to $34.76 billion, up from $29.58 billion in the same period last year. Imports climbed to $62.66 billion while exports fell to $27.9 billion, reversing the modest gains achieved as part of stabilisation efforts.
Energy remains the main culprit. Pakistan's dependence on imported crude oil and petroleum products continues to consume a significant portion of foreign exchange earnings. The situation could become even more precarious amid renewed tensions involving Iran and the broader Middle East. Any disruption to regional energy supplies or spike in global oil prices would immediately inflate Pakistan's import bill and place additional pressure on the rupee. The country's vulnerability to external energy shocks remains one of the most significant threats to economic stability. Yet the problem extends far beyond oil. Pakistan imports machinery, chemicals, industrial inputs, pharmaceutical ingredients, technology products and automobile components because domestic production capacity remains inadequate. Even many export industries depend heavily on imported raw materials and equipment. Consequently, economic growth itself often results in higher imports, limiting the net foreign exchange benefit generated by exports. The export side tells an equally troubling story. Pakistan continues to rely excessively on textiles while higher-value sectors remain underdeveloped. Although IT exports have shown encouraging growth, they are still far too small to offset the massive merchandise trade imbalance.
The upcoming budget must therefore move beyond short-term revenue targets. Import compression through higher duties alone cannot provide a lasting solution. Pakistan needs aggressive investment in renewable energy. Reducing dependence on imported fuel and imported production inputs should become a national economic priority.