Pakistan’s economy is showing resilience as the trade deficit narrows significantly

• The monthly shortfall also fell by 17.7%, from $1.82 billion.
• Exports showed strong monthly growth, increasing by 10.64%.
• October figures show a significant decline in imports.

ISLAMABAD: In a remarkable turnaround that demonstrates the economy’s resilience, Pakistan’s trade deficit shrank significantly, falling 31.1% year-on-year in October 2024.

The deficit shrank to $1.5 billion, a significant drop from $2.17 billion in the same month in 2023-24, The News reported on Saturday.

This pattern suggests that the country’s external financial position is improving, particularly with regard to the current account deficit (CAD), which has long been a source of economic weakness.

The monthly deficit also fell by 17.7 percent, from $1.82 billion in September, according to data from the Pakistan Bureau of Statistics (PBS).

Such gains offer some hope in the face of a challenging economic environment, with the cumulative trade deficit for the first four months of the 2024–25 fiscal year already at $6.97 billion, down 5.6 percent from the $7.39 billion recorded in same period in 2023 -24.

There are several factors that contribute to this shrinkage. On the one hand, strict government policies aimed at reducing foreign exchange restrictions have caused a significant decline in import demand.

In addition to reducing exports, these restrictions have put a lot of pressure on import-dependent sectors of the economy.

In contrast, exports showed strong growth, increasing by 10.64% in October 2024 to reach $2.975 billion. This marks the 14th consecutive month of export growth, providing a much-needed counterweight to the shrinking trade deficit.

Year-on-year, exports showed steady improvement from September 2023, with growth rates ranging between 1.67% and 29.27% ​​in the months leading up to October 2024. Compared to October 2024 with September , exports increased by 4.9%, while imports decreased by 3.9%.

The October figures show a significant decline in imports, which fell 8.02% to $4.47 billion. This is the first month since February 2024 that imports fell, in contrast to previous months where imports rose, rising 63.2% in April. The government’s efforts to stabilize the rupee and counter the CAD have been instrumental in this transformation.

For July-October 2024-25, cumulative exports rose 13.45% to $10.88 billion, while imports rose 5.17% to $17.85 billion, resulting in a trade deficit of $6.97 billion dollars for those four months — up from $7.38 billion in the same period last fiscal year.

In addition, PBS reported on trade in services for the first quarter (July-September), revealing a trade deficit in the services sector. Pakistan imported services worth $2.6 billion while exporting $1.9 billion, leading to a deficit of $698.9 million, an improvement from $893.3 million in the same period last year.

In September 2024 alone, exports of services totaled $657 million, while imports totaled $882 million, creating a deficit of $225 million. This represents a 20.5% decrease compared to August, where the shortfall was $283.2 million.

On a year-on-year basis, September 2024 services exports rose 17%, while imports fell 4%. The trend highlights the growing efficiency in service exports, which is critical to diversifying Pakistan’s economic portfolio.