Pakistan’s external sector is in trouble. Growth in exports is losing steam, and imports are growing, expanding the trade deficit. The country’s imports of goods in December 2024 crossed $5 billion for the first time in two years and reached $5.29bn, depicting a big 14 per cent year-on-year increase. On the other hand, exports of goods totalled $2.84bn with only a 0.67pc annualised growth. The monthly trade deficit soared 34.8pc on-year to $2.44bn.

This indicates that the current account surplus may soon start shrinking. Overall balance of payments is already negative and if the promised foreign investment does not come in time or if foreign funding dries up, it may expand further. The rupee remained strong in the first half of this fiscal year (July-December 2024), but it may start losing strength gradually.

The State Bank of Pakistan’s foreign exchange reserves have also begun to fall due to external debt servicing. These reserves of $11.7bn, equivalent to just two months of imports, are not large enough to embolden the central bank to intervene in the forex market in case of the rupee’s decline — which the International Monetary Fund (IMF) will not allow either.

The hybrid regime doesn’t........

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