Pakistan’s external sector recorded a rise in overall trade activity and stronger remittance inflows during the initial months of FY2026, even as the current account deficit widened compared to last year. The period from July to October 2026 reflects a combination of expanding exports, growing import demands, increasing service activity and resilient overseas worker remittances, all of which continue to shape the country’s external financial position.
The current account posted a deficit of $733 million during the review period, a noticeable increase from the $206 million deficit recorded in the same months of the previous year. The shift is primarily driven by a larger trade gap as the country’s import bill grew at a faster pace than export earnings.
Goods exports rose by 2.0 percent, reaching $10.6 billion. This growth was supported by solid performance in key value-added textile categories. Knitwear exports increased by 8.2 percent, garments by 5.1 percent and bedwear by 6.9 percent, reflecting the sector’s continued ability to capture demand in international markets. These segments remain central to Pakistan’s export competitiveness, benefiting from improved order flows and stable production conditions.
Imports, however, expanded significantly faster, increasing by 9.6 percent to $20.7 billion. The rise was driven by higher purchases of major commodities including petroleum crude, which increased by 13.5 percent, petroleum products by 10.5 percent and palm oil by 29.4 percent. The continued reliance on imported energy and essential commodities contributed to a wider goods trade deficit, which reached $10.1 billion, compared to $8.5 billion last year.
The services sector also posted notable changes in trade activity. Service exports grew by 15.9 percent, reaching $3.0 billion, supported by expanding business, communication and digital services. Service imports rose by 12.0 percent to $4.2 billion. This resulted in a service trade deficit of $1.2 billion, slightly higher than the $1.1 billion deficit recorded last year.
Within the broader services landscape, information technology remained a key driver of growth. IT exports jumped by 19.6 percent to $1.4 billion, cementing the sector’s increasing contribution to external earnings. Growing global demand for software development, back-office support and digital solutions continues to strengthen Pakistan’s IT footprint.
Remittance inflows delivered strong support to the external account. Workers’ remittances surged by 9.3 percent, reaching $13.0 billion during the period. Saudi Arabia accounted for 24.2 percent of the inflows, while the UAE contributed 20.7 percent, reaffirming the importance of Gulf economies in Pakistan’s remittance landscape. These inflows remain essential in helping offset pressures from the trade deficit.
Foreign direct investment trends, however, moved in the opposite direction. Net FDI inflows declined to $747.7 million. China, contributing $226.7 million, and Hong Kong, adding $120.1 million, remained the top sources of investment. Sector-wise, the power sector attracted $297.0 million and financial services received $259.8 million, marking them as leading investment destinations.
Foreign portfolio investment recorded outflows during the same period, with private FPI seeing net outflows of $159.7 million and public FPI declining by $378.8 million.
As of November 14, 2025, Pakistan’s foreign exchange reserves stood at $19.7 billion, of which $14.6 billion were held by the State Bank of Pakistan. The rising reserves provide an added cushion amid growing external obligations and trade-related pressures.
The overall picture shows an external sector marked by expanding trade and strong remittances, counterbalanced by higher imports and declining FDI. Going forward, sustaining export momentum and stabilising foreign investment inflows will be essential for managing the current account trajectory in FY2026.
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