ISLAMABAD: Business leader and former president of the Islamabad Chamber of Commerce, Shahid Rasheed Butt, expressed concern on Friday over the increasingly widening trade gap, highlighting the growing imbalance between exports and imports as a significant threat to Pakistan's external account and overall economic stability.
According to Islamabad Chamber of Commerce and Industry, Butt reported that Pakistan's trade deficit with nine regional countries expanded by 41.32 percent in 2025. Exports to China declined slightly to $1.467 billion from $1.482 billion the previous year, while imports surged to $11.097 billion from $8.907 billion, marking an increase of 24.58 percent.
Butt attributed the suppressed state of exports to recurring economic cycles, a challenging business environment, weak governance, and low investment. He noted that fiscal and monetary stimulus measures have pushed domestic demand to unsustainable levels, exacerbating inflation and depleting foreign exchange reserves amid a focus on maintaining exchange rate stability. He emphasized that each economic downturn has further eroded investor confidence and policy credibility.
Security concerns and geopolitical tensions have also impacted regional trade, he said, while India's impending free trade agreement with the European Union poses a potential challenge to Pakistan's exports to the bloc, despite the country's preferential GSP+ access.
Domestically, Butt linked recent economic challenges to conditions imposed by the International Monetary Fund (IMF), which has urged full cost recovery in utilities, particularly in the power sector. Although electricity tariffs were recently lowered, this was achieved by retiring older, high-cost debt, with the possibility of raising the debt service surcharge if necessary. He noted a lack of evidence for sustained improvement in the sector's performance.
He also highlighted the IMF's warning against easing fiscal and monetary policy to boost industry, although the government has since introduced targeted incentives, including subsidies for rice exporters, following India's removal of its export ban.
Butt called on policymakers to prioritize export-oriented manufacturing, adopt modern technology, and reduce production costs, cautioning that without structural reforms, the trade imbalance will continue, impacting foreign reserves, exchange rate stability, and consumer prices.
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