The Pakistan regional trade deficit widened sharply in the first quarter of the 2026-27 fiscal year, rising 26.62 per cent to $4.97 billion. The figure covers trade with nine neighbouring countries in July to September 2026, against $3.93 billion in the same period last year, according to data compiled by the State Bank of Pakistan and reported by Dawn.
The widening gap came from two directions at once. Exports to the nine countries fell, while imports from them surged. That combination pushed the deficit up by just over $1 billion in a single quarter.
The headline numbers
| Indicator | July-September 2026 | Same period last year | Change |
|---|---|---|---|
| Trade deficit with nine neighbours | $4.97 billion | $3.93 billion | Up 26.62 per cent |
| Exports to nine neighbours | $944.24 million | $1.01 billion | Down 6.72 per cent |
| Imports from nine neighbours | $5.92 billion | $4.94 billion | Up 19.79 per cent |
The nine countries in the set are Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives.
China drove most of the widening
Imports from China rose sharply in the quarter and contributed most of the increase in the deficit. Imports from China grew 19.76 per cent to $5.82 billion, up from $4.85 billion a year earlier. As a result, the bilateral deficit with China widened by $858.808 million. That single increase accounted for about 82.18 per cent of the rise in the combined deficit with the nine countries.
Exports to China grew 17.95 per cent to $663.57 million, up from $562.56 million in the same period last year. The gain remained small beside imports of $5.82 billion, so the bilateral gap still widened by a wide margin. In simple terms, Pakistan sold more to China than a year earlier, but it bought far more.
Afghanistan, Bangladesh and India
Shipments to Afghanistan, Bangladesh and Sri Lanka declined. The fall in trade with Afghanistan was the steepest in the set. Pakistan’s exports to Afghanistan fell 88.34 per cent to $18.86 million, down from $161.76 million last year. Imports from Afghanistan stood at $0.25 million, down from $4.52 million, a decline of 94.40 per cent.
Trade with Afghanistan, including exports, has remained suspended since October 10, 2025, according to Dawn’s report. That suspension continues to weigh on overall export performance to the region.
Pakistan’s exports to Bangladesh declined 2.96 per cent to $174.77 million, down from $180.12 million last year. Imports from Bangladesh dipped 36.11 per cent to $13.88 million, down from $21.73 million.
Trade with India moved in the opposite direction on the import side. Imports from India increased 68.90 per cent to $61.74 million, up from $36.55 million last year. Meanwhile, no exports to India were recorded in the first quarter of the fiscal year.
Exports to Nepal grew in percentage terms, though the increase remained negligible in dollar value.
Why the Pakistan regional trade deficit matters
A trade deficit means a country imports more than it exports. When the gap widens, more foreign exchange leaves the country to pay for imports than comes in from exports. Over time, that pressure can weigh on foreign exchange reserves and on the rupee.
The context matters here. The State Bank’s reserves stood at around $21.5 billion, equal to about three months of import cover, according to the central bank’s statement reported alongside its decision to raise the policy rate to 12 per cent. Reserves at that level give room to manage, but a widening deficit narrows that room if it persists.
The regional figures also sit beside wider price pressures. Consumer inflation reached 10.3 per cent year-on-year in September, and wheat prices have fed into that reading. The government has set wheat reserves of up to six million tonnes to guard against shortages, while petrol now retails at Rs379.25 per litre under the October 27 revision.
The deficit itself is driven mainly by the China import surge and by the collapse in trade with Afghanistan. But together, these figures show why export performance has become a central question: without stronger exports, every import surge must be paid for from reserves or from borrowing.
