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ISLAMABAD: Pakistan’s trade deficit narrowed sharply in January 2026, offering a welcome respite for the country’s external account, as a record-breaking surge in exports combined with a decline in imports, according to provisional figures released by the Pakistan Bureau of Statistics (PBS).
The monthly trade gap fell by 28.53% to $2.725 billion, down from $3.813 billion in December. On a year-on-year basis, the deficit also improved, contracting 6.61% from $2.918 billion in January 2025. The improvement reflects a rare convergence of rising export earnings and easing import payments, a combination policymaker has long sought to achieve.
Exports were the main driver of the turnaround. In January, Pakistan’s merchandise exports climbed to an unprecedented $3.061 billion (Rs 857.047 billion), marking the first time in the country’s history that monthly exports have crossed the $3 billion threshold. The figure represents a strong 34.96% increase compared with $2.268 billion in December, reversing five consecutive months of decline. Year-on-year, exports also edged up 3.73% from $2.951 billion.
Meanwhile, imports fell to $5.786 billion (Rs 1,622.264 billion), declining 4.85% month-on-month from $6.081 billion and 1.41% year-on-year from $5.869 billion. The drop in imports, alongside the export rebound, played a crucial role in easing pressure on the trade balance and foreign exchange reserves.
Analysts attributed the export surge to improved competitiveness in several key sectors, potentially aided by recent government measures aimed at lowering production costs. These include reduced energy tariffs for export-oriented industries and administrative efforts to facilitate higher outbound shipments. Crossing the $3 billion mark has been widely hailed as a milestone, signaling that the external sector may be regaining momentum after a prolonged period of sluggish performance.
Despite the encouraging monthly data, the broader trade picture for the current fiscal year remains a source of concern. During the first seven months of fiscal year 2025-26 (July to January), cumulative exports stood at $18.195 billion, reflecting a 7.09% decline from $19.583 billion in the same period last year. In contrast, imports rose 9.42% to $40.233 billion from $36.771 billion, pushing the cumulative trade deficit up by 28.22% to $22.038 billion, compared with $17.188 billion a year earlier.
In rupee terms, similar trends were observed. Monthly exports rose 34.81% while imports fell 4.97%, but the cumulative deficit widened significantly, underscoring persistent structural imbalances in the economy.
The PBS noted that data from the Federal Board of Revenue’s Demand Registration System (DRS) for January is still awaited, meaning some figures could change slightly due to rounding or late reporting.
Economists described January’s performance as encouraging but cautioned that sustaining the momentum will require deeper structural reforms. These include diversifying exports beyond traditional products, curbing non-essential imports, and ensuring exchange rate stability. The widening cumulative deficit continues to strain foreign exchange reserves and highlights the need for consistent, long-term policy support.
The government has placed export promotion at the center of its economic recovery strategy, with recent initiatives targeting textiles, agriculture, and other value-added sectors. While January’s numbers offer optimism, the year-to-date data underscores that restoring external balance will remain a complex challenge amid global uncertainties and domestic inflationary pressures.
