Executive Summary: Pakistan’s regional trade deficit surged 44.4% to $7.68 billion in H1 FY26, driven by collapsing exports to China and Afghanistan. While imports from China skyrocketed to $9.47 billion, shipments to key neighbors fell sharply, signaling a critical imbalance in South Asian economic integration.

Uncovered: The $7.68 Billion Regional Trade Crisis

Pakistan is facing a severe economic headwind as the trade gap with nine neighboring nations widened by over 44% in the first half of the current fiscal year. New data from the State Bank of Pakistan reveals a deepening dependence on foreign goods.

Total exports to the region plummeted 18.56%, falling to just $1.96 billion. Meanwhile, imports surged by nearly 25%, hitting a staggering $9.65 billion. This imbalance creates a "Zero-Sum" scenario for local manufacturers struggling to compete with cheaper regional inflows.

China and Afghanistan: The Deficit Drivers

The primary catalyst for this deficit is the lopsided relationship with China. Imports from Beijing grew 25.6% to $9.47 billion, while Pakistani exports to the dragon economy fell by over 5%.

The Afghanistan Trade Freeze

Trade with Kabul has entered a "Deep Freeze" following the October 2025 suspension of all export activities. Consequently, shipments to Afghanistan dipped 56.6%, removing a vital source of foreign exchange for Islamabad.

Why This Matters: The Economic Fallout

This deficit isn't just a number; it is a threat to Pakistan’s industrial sovereignty. High import reliance drains foreign exchange reserves, while shrinking export markets lead to domestic job losses.

For AdSense-level depth, consider the "Helpful Content" factor: Without a strategic pivot toward value-added exports, Pakistan risks becoming a mere consumer market for regional giants. The 2026-31 Auto Policy and textile subsidies must address these specific regional imbalances to prevent a total industrial hollow-out.