Exports Fall 12.5pc as August Demand Dwindles

Pakistan’s exports continued to slip in August as they fell into negative growth, ringing serious alarm bells on the country’s economy, trade performance, and competitiveness at the global level. The latest figures highlight the recurring woes for exporters, who are struggling to maintain the growth pace on account of sluggish demand, rising costs, and stiff global competition.

Exports Dip Sharply in August

According to data released by the Pakistan Bureau of Statistics (PBS), merchandise exports fell 12.49 percent on a year-on-year basis during August to $2.42 billion from $2.76 billion in the same month last year. On a month-to-month basis, exports also fell short by nearly 10 percent, reflecting the poor health of the external sector.

This autumn is part of a general downward trend. August was the fourth fall in the last five months, with July alone witnessing a brief modest rise. In the first two months of FY26 (July–August), the exports increased only by 0.65 percent at $5.11 billion from $5.07 billion in the corresponding two months previous year.

Trade pundits observe that this kind of weak growth is not enough to reverse the overall decline. An example is that exports rose 16.91 percent in July, but the rise was neutralized by August’s sharp fall.

Recent Export Trends

The weakness in export performance is not new. To the previous months:

June 2025 had a decline of 0.59 percent

May 2025 had a decline of 10.07 percent

April 2025 had a decline of 7.36 percent

March 2025 individually witnessed growth of 3.08 percent

In FY25, the total exports of Pakistan stood at $32.11 billion, which is an increase of 4.67 percent over $30.68 billion in the previous fiscal year. While the increase seemed encouraging, it dropped significantly after October 2024, with most months registering negative or very slow growth.

Obstacles Facing Exporters

Industry insiders identify several reasons behind this downtrend:

1. Soft Global Demand – Overseas customers have reduced orders due to the economic downturn in main markets like Europe and North America.

2. High Cost of Business – Higher energy costs, higher raw material prices, and higher taxation have made Pakistani goods uncompetitive.

3. Currency Volatility – While a falling rupee would normally increase exports, volatility in the exchange rate has discouraged long-term agreements.

4. Structural Barriers – Unrefunded lags, sluggish uptake of contemporary technology, and poor infrastructure also reduce the export competitiveness.

Amazingly, global consumers are shifting some of their clothing importations away from Bangladesh and China, and Pakistani exporters have a window. However, they are not fully availing of the opportunity due to inefficiencies at home.

Higher Imports

While exports also faltered, imports presented a mixed scenario. PBS data revealed that imports grew 6.42 percent year-on-year in August to $5.28 billion from $4.96 billion during the same period last year. On a month-to-month basis, however, imports dropped 9.35 percent.

The import bill grew by 14.23 percent to $11.2 billion in the first two months of FY26 from $9.73 billion in the comparable period last year.

Throughout the entire FY25, imports were $58.38 billion, 6.57 percent more compared to $54.78 billion in FY24. This unrelenting rise in imports, despite the country having a limited foreign exchange reserve, is becoming a serious issue.

Trade Deficit Widens

With fall in exports and rise in imports, the trade deficit has grown tremendously.

In August, the trade deficit rose 30.13 percent to $2.86 billion from $2.21 billion in August 2024.

For Jul–Aug FY26, the trade deficit was $6.02 billion compared to $4.66 billion during the same period of last year.

In FY25, the trade deficit widened year-on-year by 9 percent to $26.27 billion from $24.11 billion in FY24.

The increase in the deficit raises doubts about the sustainability of Pakistan’s external accounts, especially given the subdued growth in exports and heightened reliance on imports.

Economic Implications

A shrinking export base and expanding trade deficit have multiple threats to Pakistan’s economy:

Foreign Exchange Reserve Pressure – The State Bank of Pakistan will increasingly find it challenging to maintain reserves stable.

Balance of Payments issues – A growing trade gap contributes to the need for external borrowing.

Rupee Impact – Rising imports in addition to weak exports could further weaken the rupee.

Industrial Slowdown – Export-oriented industries can cut down production if foreign orders continue to fall.

The Way Forward

Experts say that Pakistan must work hard on these areas in order to stabilize its trade performance. Some measures could be:

1. Decreasing the Cost of Production – Cutting energy tariffs and providing subsidies to exporters.

2. Diversification of Export Markets – Smoothing out new markets in Africa, Central Asia, and Latin America.

3. Value-Added Exports – Moving from raw materials to higher value-added items like technology-oriented products and branded clothing.

4. Policy Support – Streamlining tax rebates, improving infrastructure, and offering finance support for exporters.

5. Encouraging Adoption of Technology – Encouraging digital instruments and automation in exporting industries.

Conclusion

Pakistan’s August trade statistics signal a alarming situation. Exports are falling, imports remain high, and the trade deficit is accelerating at a fast pace. While the global demand remains sluggish, local issues such as high rates, inefficiency, and uncompetitiveness are further worsening the situation.

Unless the structural reforms are done sooner than later, the export sector may continue to deteriorate, binding the country to manage its foreign accounts and hamper overall economic growth.