Rising Trade Deficit and Expensive Oil Imports Raise Pressure on Pakistan’s Economy

KARACHI, May 7, 2026: Pakistan is facing mounting economic pressure as the country’s trade deficit is feared to surge to nearly $32 billion by the end of the current fiscal year, raising concerns over the balance of payments and foreign exchange reserves, according to industry experts and financial analysts.

With the financial year approaching its close on June 30, economists warn that pending international payments, rising import costs, and expensive petroleum imports could significantly strain the country’s external account position.

Financial experts have partly blamed the situation on what they describe as a “managed exchange rate,” arguing that an artificially stable Pakistani rupee has made the US dollar relatively cheaper, encouraging excessive imports — particularly luxury goods such as high-end vehicles.

Analysts pointed out that while Pakistan kept the rupee relatively stable, India allowed its currency to depreciate sharply. The Indian rupee has reportedly fallen nearly 10 percent over the past year, reaching around Rs95.40 against the US dollar this week, amid heavy foreign capital outflows linked to ongoing geopolitical tensions and the Gulf conflict.

Pakistan has also experienced significant foreign investment outflows. According to State Bank data, the country recorded equity market inflows of $247 million during the first 10 months of FY26, while outflows reached $884 million during the same period. Nearly 94 percent of foreign investment in domestic bonds also reportedly exited the country.

Faisal Mamsa, CEO of Tresmark, warned that prolonged regional instability could create additional economic challenges for Pakistan.

“If the war-like situation continues for another month, Pakistan could face difficulties because final international payments are due at the end of the fiscal year, while expensive petroleum imports will continue to put pressure on reserves,” he said.

However, he disagreed with claims that the dollar was cheaper in Pakistan than in India.

Currency market observers have also noted increased demand for dollars through cryptocurrency trading channels, where the dollar has reportedly traded as high as Rs292, indicating that the rupee may still face depreciation pressure.

Concerns have intensified over the fuel import bill after Prime Minister Shehbaz Sharif recently stated that Pakistan’s weekly oil import cost had increased from approximately $300 million before the Gulf conflict to nearly $800 million afterward.

Despite those concerns, official trade data showed that Pakistan’s petroleum import bill during July-April FY26 stood at $10.45 billion, slightly lower than the $11.25 billion recorded during the same period last year.

Meanwhile, imports of luxury and automobile-related products witnessed a sharp increase. Imports of Completely Built Units (CBUs), including finished vehicles, surged to $317 million during the first 10 months of FY26 compared to $76 million a year earlier.

Similarly, imports of Completely Knocked Down (CKD) units rose to $1.37 billion, compared to $780 million during the corresponding period last fiscal year.

The Pakistani rupee, which had weakened to Rs306 per dollar in 2023 before stabilizing around Rs286 later that year, has gradually appreciated during FY26 and is currently trading below Rs280 in the interbank market.

Experts caution that despite strong remittance inflows expected to remain around $40 billion, Pakistan could still face a widening current account deficit that may significantly impact foreign exchange reserves if import pressures continue.