Pakistan's Trade Deficit With Nine Neighbours Widens 26.6% to $4.97bn

Pakistan's trade deficit with nine neighbouring countries widened 26.6% to $4.97 billion in the first quarter of FY27 (July-September 2026), up from $3.93 billion in the same period last year, according to State Bank of Pakistan data reported by Dawn on October 27. Exports to the nine countries fell 6.72% to $944.24 million, while imports rose 19.79% to $5.92 billion.

The nine countries in the SBP's regional grouping are China, Afghanistan, India, Bangladesh, Sri Lanka, Iran, Nepal, Bhutan and the Maldives.

China drives most of the increase

The bilateral deficit with China alone widened by about $858.8 million, which accounts for roughly 82% of the combined regional increase. Imports from China rose 19.76% to $5.82 billion over the quarter, while exports to China also grew, up 17.95% to $663.57 million. China remains by far Pakistan's largest source of imports in the region, so even a shared increase in both exports and imports still leaves a much larger gap in absolute dollar terms.

Afghanistan trade stays suspended

Pakistan's exports to Afghanistan fell 88.34% to $18.86 million from $161.76 million a year earlier, while imports from Afghanistan fell 94.4% to $0.25 million. Commercial trade between the two countries has been suspended since October 10, 2025, following border tensions, which explains most of the collapse in both directions; the residual flows Dawn's figures show likely reflect goods already in transit or cleared before the suspension took effect, though Dawn's report did not specify.

Trade with India, long restricted following the suspension of formal commercial ties, showed a smaller but notable shift: imports from India rose 68.9% to $61.74 million, with no exports recorded in the other direction. Bangladesh trade moved the opposite way on both sides — exports fell 2.96% to $174.77 million and imports fell 36.11% to $13.88 million.

Why the gap keeps widening

A widening regional trade deficit does not by itself say whether Pakistan's overall external position is improving or worsening; it depends on how the country's trade with the rest of the world, remittances and reserves are moving at the same time. Pakistan's overall trade deficit for the same quarter, covering trade with every country, came to $10.8 billion, up 15% year-on-year, data compiled by Topline Securities and reported by ProPakistani show, with total exports up 11% to $8.4 billion and total imports up 13% to $19.2 billion. The regional number released on October 27 captures a narrower slice of that wider gap: Pakistan's reliance on Chinese imports, from machinery to raw materials, has grown faster than its ability to sell comparable volumes back.

Pakistan's declining foreign direct investment inflows, reported by OICCI and the IMF in September, add to the pressure on the balance of payments that a wider trade gap with the region puts on the exchange rate and reserves. The rupee's position against the dollar, tracked on our dollar rate page, is one of the places that pressure would show up first if it is not offset by other inflows.

What to watch

The SBP has not said whether it expects the regional gap to narrow in the second quarter of FY27, and Dawn's report did not include commentary from government officials on the China figures specifically. The next data point will be the SBP's October trade and current account release, expected in the coming weeks, which will show whether the pattern from the first quarter is continuing.

Build Better Pakistan's Economy Desk tracks Pakistan's trade data from the State Bank of Pakistan and the Pakistan Bureau of Statistics and will update this coverage when the next monthly or quarterly figures are released.