By Moaaz Manzoor

Pakistan’s merchandise trade deficit narrowed significantly in May 2026, as a sharp contraction in imports combined with modest export growth eased pressure on the country’s external account, according to provisional data released by the Pakistan Bureau of Statistics (PBS).

Exports rose to $2.69 billion in May, up 9.0 percent from $2.47 billion in April and 0.71 percent from $2.67 billion in the same month last year. In rupee terms, exports increased 8.83 percent month-on-month to Rs749.45 billion from Rs688.66 billion, although they edged down 0.39 percent compared to May 2025.

Imports, meanwhile, fell sharply to $5.48 billion, registering a decline of 18.66 percent from $6.73 billion in April and 3.30 percent from $5.66 billion a year earlier. In local currency terms, imports dropped 18.30 percent to Rs1.54 trillion from Rs1.88 trillion in the previous month.

As a result, the monthly trade deficit narrowed to $2.79 billion, equivalent to Rs787.10 billion. The improvement was driven primarily by a steep reduction in imports across several key categories. Petroleum crude imports declined 41.07 percent month-on-month, petroleum products fell 48.11 percent, while imports of iron and steel, electrical machinery and palm oil dropped 28.35 percent, 27.91 percent and 20.61 percent, respectively.

On the export side, growth was led by value-added textile products, reinforcing the sector’s role as Pakistan’s principal foreign exchange earner. Readymade garment exports increased 17.94 percent month-on-month, bedwear rose 20.12 percent, towels gained 17.80 percent and basmati rice exports climbed 18.93 percent, while knitwear also recorded growth.

The improvement was not limited to monthly performance. Compared with May 2025, the trade deficit also narrowed, supported by both higher exports and lower imports. However, the broader picture for the fiscal year remains less encouraging.

During July-May FY2025-26, exports declined 5.67 percent to $27.89 billion from $29.56 billion in the corresponding period of the previous year. In contrast, imports increased 6.26 percent to $62.85 billion from $59.15 billion, pushing the cumulative trade deficit to $34.96 billion.

In rupee terms, the July-May trade gap widened to Rs9.84 trillion, as exports fell 5.08 percent to Rs7.83 trillion while imports rose 7.04 percent to Rs17.67 trillion.

Among the leading export categories in May were knitwear worth Rs124.25 billion, readymade garments at Rs115.41 billion, bedwear at Rs79.51 billion and cotton cloth at Rs40.64 billion. On the import side, crude petroleum remained the largest import item at Rs195.54 billion, followed by petroleum products at Rs141.63 billion, despite substantial month-on-month declines in both categories.

Although the resilience of value-added textile exports is encouraging, broader challenges remain. Pakistan continues to rely heavily on imported energy and industrial inputs, while export growth remains concentrated in a narrow range of products.

The contrast between May’s improvement and the wider fiscal-year trend highlights the fragility of the country’s external sector. Sustained progress will depend on maintaining export momentum, expanding value-added and diversified exports, and keeping imports at manageable levels without undermining industrial activity.

Credit: INP-WealthPk