Pakistan’s trade deficit dips, signalling economic resilience

ISLAMABAD: In a significant shift reflecting the resilience of Pakistan’s economy, the country’s trade deficit has contracted sharply, registering a 31.1 per cent year-on-year decline in October 2024.

The deficit narrowed to $1.5 billion, a notable decrease from $2.17 billion recorded during the same month last year. This trend signals a positive development for the nation’s external financial position, particularly concerning its current account deficit (CAD), which has long been a source of economic vulnerability.

The figures from the Pakistan Bureau of Statistics (PBS) reveal that the monthly deficit also witnessed a decrease of 17.7pc, down from $1.82 billion in September. Such improvements provide a glimmer of hope amidst a challenging economic landscape, with the cumulative trade deficit for the first four months of the fiscal year 2024-25 now standing at $6.97 billion, marking a 5.6pc decline from the $7.39 billion recorded in the same period last year.

The reasons behind this contraction are multifaceted. On the one hand, import demand has softened significantly, driven by stringent government policies aimed at easing foreign exchange pressures. These restrictions have not only curtailed outflows but have also placed considerable strain on industries reliant on imported goods.

Conversely, exports have exhibited robust growth, increasing by 10.64pc in October 2024 to reach $2.975 billion. This marks the 14th consecutive month of rising exports, providing a much-needed counterbalance to the shrinking trade deficit. Year-on-year, exports have shown consistent improvement since September 2023, with growth rates fluctuating between 1.67pc and 29.27pc in the months leading up to October 2024. When comparing October 2024 to September, exports increased by 4.9pc, while imports decreased by 3.9pc.

October’s data highlights a significant decline in imports, which fell by 8.02pc to $4.47 billion. This marks the first month since February 2024 that imports have decreased, contrasting sharply with previous months where imports surged, notably rising by 63.2pc in April. The government’s efforts to stabilise the rupee and address the CAD have played a pivotal role in this transformation.

For the July-October 2024-25 period, cumulative exports climbed 13.45pc to $10.88 billion, while imports rose by a more modest 5.17pc to $17.85 billion, resulting in a trade deficit of $6.97 billion for these four months — down from $7.387 billion during the same period last fiscal year.

Additionally, the PBS reported on trade in services for first quarter (July-September), revealing a services trade deficit. Pakistan imported $2.6bn worth of services while exporting $1.9bn, leading to a deficit of $698.9 million, an improvement from $893.3 million in the same timeframe last year.

In September 2024 alone, services exports totaled $657 million, while imports amounted to $882 million, creating a deficit of $225 million. This represents a 20.5pc reduction compared to August, where the deficit was $283.2 million.

On a year-on-year basis, September 2024 services exports rose by 17pc, while imports decreased by 4pc. The trend highlights a growing efficiency in service exports, which is critical for diversifying Pakistan’s economic portfolio.