Pakistan misses annual export target by $5.2bn

ISLAMABAD: Pakistan fell short of its export goal for the fiscal year ended on Tuesday by $5.2 billion, with total exports dropping to $30.1 billion and the trade deficit rising sharply as imports increased, according to data reported by the Pakistan Bureau of Statistics.

The government had set an export target of $35.3 billion for FY2025-26 under the Annual Plan, but actual receipts were 6% lower than the previous year and $1.9 billion less than the same period a year earlier. The annual trade deficit increased to $39.5 billion, while the gap widened by $7 billion, or 21.6%, from the preceding fiscal year. The deficit was more than double the level of Pakistan's gross official foreign exchange reserves.

The missed target came after the Planning Commission recommended to the National Economic Council last month that economic incentives be redirected from protection and rent-seeking toward productivity and export performance. The recommendation was not implemented and the government instead continued with broad-based export subsidies. In the budget, the government allocated Rs88 billion for exporter financing at 4.5% interest, while withdrawing Rs76 billion in subsidies for remittances routed through banks and exchange companies to cover transfer costs to Pakistan.

Planning Minister Ahsan Iqbal recently said Pakistan would not be able to move beyond reliance on the International Monetary Fund until exports rise to sustainable levels. The government missed the IMF-linked tax collection target for FY2025-26 by Rs975 billion, or $3.5 billion. The annual trade deficit of $39.5 billion was equal in size to the IMF's three-year bailout package.

Imports rise as exports stay under pressure

Imports climbed to $69.6 billion during FY2025-26, an increase of $5.1 billion, or 7.9%, compared with the previous year. The rise was attributed to duty relaxations in the budget and higher petroleum prices following the Middle East conflict. Keeping imports in check in the current fiscal year would be difficult.

For FY2026-27, the export target has been set at $32.8 billion, only 8.5% above the latest annual outcome, while imports are projected to exceed $70 billion. The trade deficit target for the new fiscal year is $37 billion, which would largely be financed through remittances. The new export target does not align with the goals of the National Economic Plan for 2029.

Exporters have argued that the rupee is overvalued by 5%, hurting competitiveness and keeping firms focused on the domestic market. The rupee-dollar rate was around Rs278.15 on Thursday. There were concerns that some exporters may be retaining part of their proceeds abroad by understating export values or reclassifying some earnings as services exports to avoid income tax.

June data shows sharper monthly deterioration

In June alone, exports dropped to $2.2 billion, down by $238 million, or 9.6%, from the same month last year. Imports rose by $1.4 billion to $6.8 billion. As a result, the monthly trade deficit expanded 57% to $4.5 billion, increasing by $1.6 billion in absolute terms.

On a month-on-month basis, the June trade deficit widened by more than 63% as exports fell 17% and imports rose 24%, according to the PBS data.

Planning Commission links exports to human development

The Planning Commission also urged the NEC, which includes representation from the federal government and all four provinces, to improve human development indicators to support lasting export growth. Its presentation said countries in the region that invested in human capital advanced more quickly in expanding exports.

Iqbal said Pakistan's biggest competitive disadvantage was its literacy rate, which he said had improved to about 63% but remained well below that of regional competitors. He said export expansion follows growth in human capital and added that no country had become an export powerhouse with weak education outcomes.

Speaking about Pakistan's external financing needs, Iqbal said the country depended heavily on remittances, multilateral lending and commercial borrowing to meet current account requirements. "We must shift our focus from loans and aid to increasing exports and investment, and reducing imports through enhanced productivity and innovation," he added.