Food Imports, Energy Shocks and Weak Exports Test Pakistan’s Recovery/Arsal Mir

Three developments reported last Friday — a widening food trade deficit, the return of Pakistan’s current account to deficit, and the government’s decision to introduce daily fuel price revisions amid renewed geopolitical tensions in the Gulf — together paint a sobering picture of an economy that remains structurally vulnerable despite recent signs of macroeconomic stabilisation. While headline indicators suggest that external pressures have eased compared with the crisis years, a closer examination reveals that Pakistan’s external sector continues to depend on temporary cushions rather than lasting improvements in competitiveness and productivity.

At first glance, the current account deficit of just $139 million in FY26 appears modest and may even be interpreted as evidence that the economy has regained balance. However, the composition of the external account tells a less reassuring story. The relatively small deficit was not achieved through a significant expansion in exports or a sustained improvement in industrial competitiveness. Instead, it was overwhelmingly supported by a record $41.6 billion in workers’ remittances. These inflows effectively financed a large share of Pakistan’s import bill and prevented a much wider external imbalance. Without this unprecedented support from overseas Pakistanis, the country’s current account position would have deteriorated considerably.

The weakness of Pakistan’s export sector remains evident. Merchandise exports declined during the year, while the modest increase in services exports merely offset part of the losses in goods trade. Imports, meanwhile, remained elevated as the economy continued to rely heavily on foreign supplies for food, fuel and industrial inputs. Consequently, the merchandise trade deficit exceeded $35 billion, underscoring the persistent gap between what Pakistan produces for global markets and what it consumes from abroad.

The deterioration in agricultural trade is particularly troubling because it highlights deeper structural failures in an economy that has historically relied on agriculture as one of its principal strengths. Food imports increased by nearly 12 per cent to more than $9 billion, even as exports of raw food products declined by almost 30 per cent. Rice exports — traditionally among Pakistan’s leading agricultural exports — weakened, while vegetable exports fell by more than half, partly reflecting the disruption of cross-border trade with Afghanistan, once an important regional market. Equally striking was Pakistan’s decision to import substantial quantities of sugar only months after permitting sugar exports, exposing inconsistencies in agricultural planning and market regulation. Imports of edible oils also continued their upward trajectory, reinforcing the country’s dependence on foreign food supplies.

These trends point to broader structural weaknesses that extend beyond agriculture. They reflect inadequate productivity growth, poor export diversification and inconsistent policymaking that frequently alternates between encouraging exports and authorising imports of the same commodities under pressure from influential business interests. Such policy reversals undermine market confidence, discourage investment and make long-term planning increasingly difficult for producers and exporters.

External risks have become even more pronounced with renewed tensions in the Gulf, a region from which Pakistan imports roughly three-quarters of its energy requirements. Rising international oil prices directly increase the country’s import bill, place renewed pressure on foreign exchange reserves, widen inflationary pressures and complicate macroeconomic management. In response to this evolving environment, the government has decided to shift to daily fuel price revisions instead of periodic adjustments, arguing that more frequent pricing will improve transparency and ensure domestic prices reflect international market movements more accurately.

Whether this transition enhances market efficiency or merely introduces greater uncertainty will depend largely on the credibility of regulatory oversight and the government’s willingness to maintain predictable pricing policies. At the same time, the official emphasis on accelerating the adoption of electric vehicles acknowledges an important long-term reality: Pakistan cannot indefinitely remain dependent on imported petroleum. However, a successful energy transition requires stable incentives, consistent regulatory frameworks and sustained investment rather than periodic policy reversals that undermine investor confidence.

Taken together, the three reports serve as a reminder that recent macroeconomic stabilisation has provided Pakistan with breathing space but has not fundamentally strengthened the economy’s resilience. Record remittances cannot indefinitely compensate for weak export growth, increasing dependence on imported food, inconsistent agricultural policies and continued vulnerability to global energy shocks. Each external disturbance continues to expose the same structural weaknesses that have constrained Pakistan’s economic performance for decades.

Achieving durable external stability will require far more than prudent macroeconomic management. It demands a growth strategy centred on export competitiveness, higher agricultural productivity, diversification into higher-value products, investment in indigenous energy resources and greater policy consistency. Remittances will remain an important source of foreign exchange, but they cannot substitute for a productive economy capable of generating sustainable export earnings and reducing reliance on imports. Unless these underlying structural deficiencies are addressed, Pakistan will remain vulnerable to recurring external crises, regardless of short-term improvements in headline economic indicators.