Rising trade deficit exposes Pakistan’s structural weaknesses

The debate on the economic structure and its consequences for the balance-of-payments crisis has become ever more prevalent as imports start increasing, subsequently leading to a higher trade deficit. Policymakers often start to panic as calls are made to curtail imports. Several key studies on the topic have highlighted low productivity, the inability to accumulate knowledge and generate the necessary human capital, and, more importantly, the failure to attract efficiency-driven investment as the major impediments to economic development in Pakistan. It is imperative that any agenda to bring about major economic reforms and structural transformation begins with an understanding of these key impediments. Trade statistics for November 2025 reveal a year-on-year increase of approximately 33% in the trade deficit, with exports declining by 15% and imports increasing by 5%. Total exports in the first five months decreased by 6.4%, while imports increased by 13.3%, resulting in a 37.2% increase in the trade deficit.