Pakistan’s trade deficit stood at $2.857 billion in December, shrinking 40.68 per cent year-on-year, data released by the Pakistan Bureau of Statistics (PBS) showed.

In December 2021, the deficit had clocked in at $4.816bn. The lower figure was mainly on account of a decrease in imports, which amounted to $5.161bn — declining 31.91pc from last December’s $7.58bn.

Imports have plunged primarily because of restrictions imposed since May by the State Bank of Pakistan (SBP) in order to reduce dollar outflows to protect the country’s declining foreign exchange reserves as well as stem the rupee’s freefall.

Import restrictions were in place even on items required as raw material for exports. As a result, exports also declined last month. PBS data showed that exports in December totalled $2.304bn, a decrease of 16.64pc from last year’s $2.764bn.

Eventually, the central bank removed these curbs in the new year, on Jan 2, as the economic situation began worsening with several companies suspending operations, citing inventory shortages due to import delays.

On a month-on-month basis, the trade deficit increased by 2.36pc. This was due to a decline of 3.64pc in exports while imports also increased marginally by 0.41pc.

PBS data showed that the trade deficit narrowed by 32.65pc in the first half of the current fiscal year compared to July-Dec 2021. Exports and imports during the last six months stood at $14.249bn and $31.382bn, respectively, declining by 5.79pc and 22.63pc compared to the same period last year.

Overall, the trade deficit in July-Dec 2022 came in at $17.133bn compared to $25.438bn in the same period last year.