A widening trade deficit of up to $32 billion is posing renewed pressure on Pakistan’s balance of payments as the fiscal year draws to a close, according to industry and financial sources. Analysts warn that final external payments due before June 30 could further strain foreign exchange reserves.
Market experts say the recent “managed exchange rate” policy has contributed to distortions in trade flows by keeping the dollar relatively cheaper, which they argue has encouraged higher imports, particularly of luxury goods such as high-end vehicles. This, in turn, has widened the import bill at a time of already fragile external accounts.
Some economists also pointed to contrasting currency trends in the region, noting that the Indian rupee has depreciated by around 10% over the past year and continues to weaken amid capital outflows and broader regional uncertainty linked to conflict conditions in the Gulf. India’s currency recently reached a record low of 95.40 per dollar.
In Pakistan, however, the rupee has shown relative stability, trading in a narrow range of Rs277–282 per dollar in recent months after previously reaching Rs306 in 2023 before recovering. Since the start of the current fiscal year, the currency has gradually appreciated and is now below Rs280 in the interbank market.
Despite the apparent stability, financial sector data indicates significant capital movement pressures. According to State Bank figures, equity market inflows during the first 10 months of the fiscal year stood at $247 million, while outflows reached $884 million. In domestic bonds, nearly 94% of foreign investment reportedly exited during the same period.
Analysts say such outflows reflect persistent investor caution amid external and geopolitical uncertainty, including disruptions linked to the ongoing Gulf conflict. Some experts warn that if the security situation continues, Pakistan could face additional stress on reserves due to higher import costs and year-end external payment obligations.
Energy imports remain a key pressure point. While government estimates suggest a sharp increase in weekly oil import costs from around $300 million to $800 million, official trade data shows a more complex picture. Petroleum import costs during the first 10 months of FY26 were recorded at $10.45 billion, lower than $11.25 billion in the same period last year, indicating that exchange rate movements have partly offset higher global prices.
At the same time, imports of vehicles have surged significantly. Completely Built Units (CBUs) rose to $317 million from $76 million last year, while Completely Knocked Down (CKD) vehicle imports increased to $1.37 billion from $780 million, reflecting stronger domestic demand and easier import conditions.
Currency market observers have also noted the emergence of alternative dollar channels, including crypto-linked transactions reportedly pricing the dollar as high as Rs292, suggesting underlying pressures on the formal exchange rate system.
Economists caution that despite steady remittance inflows, projected at around $40 billion, Pakistan could still face a current account deficit if import growth and external payments remain elevated, potentially putting renewed pressure on foreign exchange reserves in the coming months.