Pakistan's January 2026 trade deficit narrowed due to surging exports and falling imports, but long-term trends and high business costs remain concerning.

Pakistan's exports surged 35% month-on-month in January 2026 to $3.06 billion, while imports fell 5% to $5.79 billion, narrowing the trade deficit to $2.73 billion. Year-on-year, exports rose 3.73% and imports dropped 1.41%, reducing the deficit by 6.61% compared to January 2025. However, for the first six months of the fiscal year, exports declined 7.09% and imports rose 9.42%, resulting in a $22.04 billion trade deficit. Despite the monthly improvement, exporters face growing challenges due to a 34% higher cost of doing business than regional peers, driven by high energy prices, inefficient subsidies, and burdensome tax policies, which have hurt competitiveness and led to factory closures, especially in textiles.