Pakistan'S Trade Deficit Worsens Amid Export Decline And Inflation

As of February 2026, Pakistan's economic landscape is showing signs of improvement despite ongoing challenges. The Ministry of Finance has reported that macroeconomic stability, easing inflation, and fiscal consolidation are supporting growth. Large-scale manufacturing (LSM) grew by 4.8% during the first half of FY26, driven by sectors such as automobiles and apparel. However, the ministry cautioned that geopolitical uncertainty and global commodity price volatility remain significant risks to this recovery. The current account deficit reached $1.1 billion in the first seven months of FY26, largely due to a 5.5% decline in exports against a 9.8% increase in imports, resulting in a trade deficit that expanded to $20.5 billion year-on-year. Despite an increase in workers' remittances by 11.3% to $23.2 billion, foreign direct investment has plummeted to $517.4 million from $1.483 billion the previous year, highlighting the precarious economic situation (Profit Pakistan, February 28, 2026).