Pakistan faces $40.5 billion trade Deficit as 40 power projects struggle with delays

Pakistan is facing a massive trade deficit of $40.5 billion while 40 major power transmission projects financed through foreign loans

Islamabad: Pakistan is facing a massive trade deficit of $40.5 billion while 40 major power transmission projects financed through foreign loans are struggling with funding delays, government approvals, land access problems and security concerns, the National Assembly Standing Committee on Economic Affairs Division was informed.

The committee was told that Pakistan imported goods worth $80.9 billion during the financial year 2025 to 2026, compared with exports of only $40.4 billion. The figures showed that the country spent almost twice as much on imports as it earned from exports, raising serious questions about its ability to reduce dependence on foreign borrowing.

The meeting was held at Parliament House, Islamabad, under the acting chairmanship of Dr. Mirza Ikhtiar Baig, MNA. According to the briefing, 40 ongoing power transmission projects are being financed by international development partners under 17 loan agreements. However, only about 52 percent of the total agreed loan amount has been disbursed so far.

The committee was informed that delays in the allocation of rupee cover, which is the local currency funding needed to use foreign loans, have become a major obstacle to project implementation. These delays have affected the timely release and use of loan funds and the settlement of payments according to approved project schedules.

The projects are being supported by the World Bank, Asian Development Bank, Agence Française de Développement, KfW Development Bank and Japan International Cooperation Agency. The committee was told that the 40 ongoing projects cover six major categories of work, including improvements to the transmission and distribution system, construction and upgrading of grid stations, the CASA 1000 transmission project and other infrastructure needed to strengthen Pakistan’s electricity network.

The expected completion dates of the ongoing projects range from November 2026 to December 2028. Officials also disclosed that another 38 power projects are in the proposed pipeline, with planned completion dates extending up to 2036.

This means that a total of 78 ongoing and proposed projects are part of the government’s plans to improve the power transmission system. The committee was informed that several problems are slowing down the work, including delays in government approvals, No Objection Certificates, land access and coordination between federal and provincial authorities.

Particular concerns were raised about pending approvals for the Tarbela 5th Extension Project and Jauharabad. Officials said that difficulties in securing the right to use land for transmission lines, along with delays in obtaining approvals from provincial governments, were affecting project execution.

Dr. Mirza Ikhtiar Baig assured the committee that he would take up the pending matters with the Government of Sindh to help remove obstacles and speed up work on affected projects. The committee was further informed that coordination problems with district administrations were creating difficulties in gaining access to project sites.

Security concerns in Zhob and other areas of Balochistan were also identified as major challenges to the timely execution of transmission projects. Another serious issue involved the CASA 1000 project, which is intended to support electricity transmission across national borders.

The committee was informed that the associated stations would remain under the care and custody of the contractor until the Afghanistan section of the project becomes ready for operation. The delay in the Afghanistan section continues to affect the overall completion and commissioning of the project.

Officials also explained that work to improve existing transmission lines requires planned electricity shutdowns. Such work must be carried out during months when electricity demand is relatively low to reduce disruption to consumers.

The committee appreciated the introduction of BEST PAK Phase I and STATCOM technology in Pakistan for the first time. Officials said these technologies would help improve electricity system stability, increase efficiency and reliability, and strengthen the capacity of the existing transmission network.

Meanwhile, the committee was briefed on the government’s plans to reduce dependence on foreign borrowing by increasing exports and strengthening the national economy. The government has set an export target of $63 billion for the financial year 2028 to 2029.

However, the latest figures presented to the committee showed that Pakistan’s exports stood at $40.4 billion during the financial year 2025 to 2026. To meet the new target, the country will need to increase annual exports by $22.6 billion, or approximately 56 percent, within three financial years.

The committee also reviewed the country’s $80.9 billion import bill, which resulted in a trade deficit of $40.5 billion. Officials reported that overseas Pakistani workers sent home $41.6 billion in remittances during the same financial year, providing important support to the country’s foreign exchange position.

The remittance figure was slightly higher than the reported trade deficit, showing the importance of money sent by Pakistanis working abroad. The committee was informed that the government was taking several steps to increase exports, including improving access to export financing and reducing business costs for exporters.

Other proposed measures include helping small and medium businesses enter export markets, expanding trade agreements with other countries and seeking zero customs duty access for Pakistani products.

Officials also discussed Free Trade Agreements, Preferential Trade Agreements and the Generalized System of Preferences as ways to improve access to international markets. The government is also working on tariff reforms, expansion of export markets and implementation of the Strategic Trade Policy Framework for the financial years 2026 to 2031.

Special attention is being given to new export opportunities in the information technology sector to increase foreign exchange earnings and reduce dependence on traditional exports. The committee stressed that government departments must improve coordination, implementation and monitoring to ensure that export targets are achieved and that the country gradually reduces its reliance on foreign loans.