By Moaaz Manzoor

Pakistan’s merchandise trade deficit narrowed by 39.43 percent month-on-month to $2.582 billion in May 2026, primarily due to a sharp decline in imports and a moderate increase in exports, according to provisional data released by the Pakistan Bureau of Statistics (PBS).

The improvement provided short-term support to the external sector as imports fell to $5.287 billion in May from $6.731 billion in April, registering a decline of 21.45 percent. Exports, meanwhile, increased 9.59 percent to $2.705 billion from $2.468 billion a month earlier.

In rupee terms, exports rose 9.45 percent month-on-month to Rs753.738 billion, while imports dropped 21.55 percent to Rs1.475 trillion. As a result, the trade deficit narrowed to Rs721.595 billion in May from Rs1.192 trillion in April, reflecting a decline of 39.46 percent.

The data show that lower imports were the main factor behind the improvement. Imports decreased by $1.444 billion compared to April, while exports increased by $237 million. Together, these changes reduced the monthly trade gap by around $1.681 billion.

The year-on-year comparison also showed a positive trend. Exports increased 1.26 percent to $2.705 billion in May 2026 from $2.671 billion in the corresponding month last year. Imports declined 6.63 percent from $5.662 billion, helping narrow the trade deficit by 13.68 percent from $2.991 billion recorded in May 2025.

In rupee terms, exports remained largely stable, edging up 0.18 percent to Rs753.738 billion from Rs752.392 billion a year earlier. Imports fell 7.50 percent to Rs1.475 trillion from Rs1.595 trillion, while the trade deficit declined 14.35 percent to Rs721.595 billion.

Despite the encouraging monthly performance, the broader fiscal-year picture remained challenging. During July-May FY2025-26, exports declined 5.61 percent to $27.904 billion from $29.563 billion in the same period of the previous fiscal year.

At the same time, imports increased 5.94 percent to $62.662 billion from $59.148 billion. Consequently, the cumulative trade deficit widened by 17.48 percent to $34.758 billion during the first 11 months of the fiscal year, compared with $29.585 billion a year earlier.

In rupee terms, the cumulative trade deficit increased 18.34 percent to Rs9.775 trillion from Rs8.260 trillion. Exports fell 5.03 percent to Rs7.832 trillion, while imports rose 6.67 percent to Rs17.608 trillion.

The contrast between May’s performance and the cumulative fiscal-year trend highlights the challenges facing Pakistan’s external sector. While the lower import bill helped ease pressure on the trade balance in the short term, the overall data indicate that higher imports and weaker exports have continued to widen the trade gap during most of FY2025-26.

A narrower monthly deficit can provide temporary relief by reducing pressure on foreign exchange reserves and the current account. However, economists note that a lasting improvement will require sustained export growth and a manageable import bill that does not undermine industrial and economic activity.

The latest figures suggest that May brought a welcome easing in trade pressures, but the longer-term outlook will depend on whether export momentum strengthens in the coming months and whether the decline in imports reflects improved external-sector management rather than weaker domestic demand.

Credit: INP-WealthPk