Pakistan’s trade deficit worsens by an alarming 33 percent in Feb

Pakistan’s current account is under pressure, as the trade deficit has grown by a staggering 33 percent in February. As per reports, the trade gap value now sits at an uneasy $2.3 billion despite Islamabad’s persistent attempts to improve its balance.

The worsening of Pakistan’s international trade position has to do with a fall in exports. Concurrently, imports have reportedly posted double-digit growth rates, ringing alarm bells for lawmakers.

In a trade summary released by the Pakistan Bureau of Statistics (PBS), the entity outlined how addressing the underlying factors contributing to the country’s subpar exports will take a significant amount of time. The summary also discussed the reliance Pakistan’s manufacturing sector has on imports to produce their final goods.

PBS has revealed that the cash-strapped economy’s trade deficit ballooned by a whopping $576 million in February 2025 compared to the corresponding period last year. This spells trouble for the State Bank of Pakistan’s (SBP) reserves, which, as of 21 February 2025, stood at just $11.22 billion.

Officially, Pakistan follows a market-based flexible exchange rate system; however, in practice, authorities follow a managed float exchange rate with the SBP intervening to stabilise the value of the rupee. SBP’s reserves could fall because of these interventions, as persistent trade deficits can cause a significant outflow of dollars from Pakistan – which causes the rupee to witness depreciation.

According to reports, exports in February fell below historical averages. In a bid to boost export revenues for Pakistan, the federal government has now allowed sugar exports, especially to Afghanistan. Analysts believe that there is a surplus of the commodity in the domestic economy, which could serve to plug the growing gap in Pakistan’s trade deficit.

On the other hand, imports in February 2025 have grown by 10 percent compared to February 2024. This translates into a $432 million rise in Pakistan’s import bill, bringing the total import value to a staggering $4.74 billion for February.

Previously, Pakistan’s imports exceeded $5 billion for two months in a row, resulting in a significant worsening of Pakistan’s current account deficit. According to credible reports, Islamabad was unable to continue to run deficits of such magnitude as they could jeopardize ‘external sector’ stability.

The federal government implemented various import controls approximately three years ago to curb imports. Islamabad might need to consider tightening the existing import controls to protect the economy from large foreign currency outflows once again.