Pakistan’s trade deficit with nine neighbouring countries widened by 30 percent in the 2025–26 fiscal year, reaching $15.93 billion, driven by declining exports to regional markets and rising imports, particularly from China.

According to the latest data released by the State Bank of Pakistan, the country’s trade gap with Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives increased from $12.26 billion in the previous fiscal year to $15.93 billion.

Pakistan’s total exports to the nine neighbouring countries fell by 11 percent to $3.95 billion, while imports from the region rose by 19.1 percent to $19.89 billion, highlighting a growing trade imbalance.

The decline in exports was largely attributed to reduced shipments to Afghanistan, Bangladesh and Sri Lanka. Trade with Afghanistan, including exports, has remained suspended since October 10, 2025, significantly affecting Pakistan’s regional export performance.

Exports to Afghanistan dropped by 68.9 percent to $243.69 million, down from $783.95 million in the previous fiscal year. Imports from Afghanistan also declined sharply by 74.9 percent, falling to $6.5 million.

China remained Pakistan’s largest regional trading partner. Exports to China increased by 8.4 percent to $2.68 billion, accounting for 68 percent of Pakistan’s exports to neighbouring countries. However, imports from China climbed 19.8 percent to $19.54 billion, representing 98 percent of Pakistan’s regional imports.

Trade with India remained limited despite a percentage increase in exports. Pakistan’s exports to India rose to $2.93 million, while imports from India declined 7.6 percent to $168.73 million.

Exports to Bangladesh fell 9.3 percent to $715.59 million, while exports to Sri Lanka declined 22.8 percent to $293.38 million during the fiscal year.

The latest figures underscore Pakistan’s growing dependence on imports, particularly from China, while declining exports to regional markets continue to widen the country’s trade deficit.

Iranian media have reported the launch of the first direct transit train on the Beijing–Iran–Afghanistan route, carrying a shipment from China to Herat province through Iran’s railway network.

Mustafa Rezaei, head of the Iran–Afghanistan Railway Corridor, said the shipment marks the first time that cargo has been transported directly from China to Afghanistan without unloading and reloading along the way.

The 500-tonne shipment of MDF boards was loaded in Beijing, passed through Turkmenistan, entered Iran’s railway network, and was then transported to Rozanak station in Herat province via the Khaf–Herat railway line.

Rezaei described the operation as the first direct rail transit service connecting Beijing and Herat through Iran, saying the route would significantly reduce transportation time and costs compared with previous trade routes.

He said the launch of the train demonstrates that the Khaf–Herat railway corridor has entered a new phase of commercial and transit operations. Increasing cargo volumes along the route could further enhance its role as a key link connecting China, Central Asia, Iran, and Afghanistan.

Rezaei added that expanding the corridor could strengthen economic and trade cooperation between Iran and Afghanistan, lower logistics costs, and improve the competitiveness of regional commerce.

Afghanistan’s transit trade through Pakistan has dropped to its lowest level in years, according to Pakistan’s Dawn newspaper.

The report says transit cargo declined from nearly 89,000 containers worth $5 billion before the Islamic Emirate returned to power to just 11,592 containers valued at $367 million in the last fiscal year.

According to Dawn, while Pakistan’s closure of Durand Line crossings with Afghanistan in October 2025 over security concerns accelerated the decline, the downward trend had already begun earlier.

Trade analysts told the newspaper that Afghanistan had already been working to reduce its reliance on Pakistani ports by expanding trade through Iran and strengthening commercial links with Central Asian countries.

The report says transit cargo through Pakistan initially rose after the Islamic Emirate’s return to power, peaking at more than 102,000 containers in fiscal year 2023, before steadily declining in subsequent years.

Dawn also reported that reverse transit, which allowed Afghan exports to reach third countries—particularly India—through Pakistan, has nearly come to a halt, falling from $454 million in fiscal year 2025 to just $7 million in fiscal year 2026.

Citing the World Bank, the newspaper said Iran has become Afghanistan’s largest source of imports, with Iranian direct and transit routes now accounting for nearly half of the country’s total imports.

However, the World Bank says the shift to alternative routes has increased import costs, reduced export revenues, and added inflationary pressure, while the decline in cross-Durand Line trade has also affected thousands of jobs linked to transport, customs, warehousing, and other businesses.