Trade deficit with nine neighbours jumps 47.5pc in first five months of FY25

ISLAMABAD: Pakistan’s trade deficit with its nine neighbouring countries surged by 47.55 percent to $4.474 billion in the first five months of the current fiscal year, up from $3.032 billion in the same period last year, reported Dawn.

Trade analysts have attributed this increase in the deficit primarily to a rise in imports from China and India. Specifically, imports from China saw a significant spike, while Pakistan’s exports to China declined.

In this context, exports to Afghanistan, Bangladesh, and Sri Lanka experienced notable growth compared to the previous year, which helped mitigate the decline in exports to China. The increasing trade deficit poses challenges for policymakers, particularly as the trade deficit with these countries reached $9.506 billion in FY24, reflecting a 49% increase from $6.382 billion in the previous fiscal year.

According to the State Bank of Pakistan, exports to Afghanistan, Bangladesh, and Sri Lanka rose during the July-November period of FY25, though exports to other nations, particularly China, continued to see reductions.

The total value of Pakistan’s exports to these nine countries—including Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan, and the Maldives—rose by 5.99 percent to $1.962 billion in July-November FY25 compared to $1.851 billion in the previous year.

On the other hand, imports saw a significant increase of 31.8 percent, reaching $6.436 billion in the first five months, up from $4.883 billion in FY24. Notably, imports from China grew by 32.40 percent to $6.276 billion, compared to $4.740 billion in the previous year. In FY24, Pakistan’s imports from China totalled $13.506 billion, a 39.78% rise from $9.662 billion the year before. China remains the primary source of imports in the region, with India following behind.

Conversely, Pakistan’s exports to China dropped by 13.9%, totalling $1.053 billion in FY25 compared to $1.223 billion in the same months last year. Imports from India also saw an increase of 6.19%, totalling $94.78 million, while exports to India remained low at $0.375 million.

Exports to Afghanistan rose sharply by 73.37% to $406.67 million in FY25, compared to $234.56 million last year, while imports from Afghanistan increased to $8.53 million.

Specific trade data with Iran is challenging to obtain due to informal trading methods, but Pakistan has moved towards barter trade in response to the smuggling of Iranian petroleum and LPG products through the porous Balochistan border.

Additionally, exports to Bangladesh grew by 29.76% to $313.99 million, while imports increased by 18% to $30.75 million. Exports to Sri Lanka surged by 25.3% to $183.89 million, attributed to the recovery of economic activity post-recession.

However, exports to Nepal dropped by 34%, and only a small increase to the Maldives was recorded. There was no trade reported between Pakistan and Bhutan during the first five months of the current fiscal year.