Pakistan’s trade deficit with nine neighbouring countries widened sharply in the first half of fiscal year 2025–2026, underscoring mounting challenges in its regional trade balance, with Sri Lanka among the countries seeing a notable decline in Pakistani exports. According to the State Bank of Pakistan, the deficit expanded by 44.42% to $7.683 billion during July–December, compared with $5.32 billion in the same period last year.
The widening gap has been driven primarily by a steep fall in exports alongside a strong rise in imports. Total exports to neighbouring countries — including Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan, and the Maldives — dropped 18.56% to $1.965 billion in the first half of FY26, down from $2.413 billion a year earlier. In contrast, imports from these countries rose 24.76% to $9.648 billion, compared with $7.733 billion in the corresponding period last year.
China remained Pakistan’s largest trading partner in the region and the dominant source of imports. Imports from China grew 25.61% to $9.472 billion, while exports to China declined 5.59% to $1.216 billion, further widening the bilateral trade imbalance. The decline in exports was not limited to China. Pakistan’s exports to Afghanistan plunged 56.61% to $219.489 million, a drop linked in part to Islamabad’s decision to suspend all trade with Afghanistan, including exports, from October 10, 2025.
Trade performance with South Asian neighbours also weakened. Exports to Bangladesh fell 7.54% to $358.499 million, while exports to Sri Lanka dropped a sharper 27.13% to $163.173 million during the period under review. Despite the fall in exports, imports from both Bangladesh and Sri Lanka increased, contributing further to Pakistan’s growing trade deficit in the region.
Trade with India remained limited, reflecting longstanding restrictions. Imports from India declined 12.73% to $97.734 million, while exports to India rose marginally in value to $2.926 million from $0.399 million in the same period last year, though the overall volume remained negligible in the broader trade picture.
The latest figures continue a troubling trend from the previous fiscal year. In FY25, Pakistan’s trade deficit with these neighbouring countries had already expanded by 29.42% to $12.297 billion from $9.502 billion the year before. Together, the data highlight persistent structural issues in Pakistan’s regional trade, where shrinking export markets and rising dependence on imports are deepening external imbalances, even as trade ties with countries like Sri Lanka and Bangladesh weaken rather than strengthen.
