Pakistan’s external account has witnessed significant improvement during the first four months of FY2025, as the current account recorded a surplus of $218 million, a substantial turnaround from the $1,528 million deficit in the same period last year. This marks a notable achievement, reflecting growth in exports and remittances, despite an increase in imports.
In October 2024 alone, the current account posted a surplus of $349 million, compared to a $287 million deficit in October 2023. This marked the third consecutive monthly surplus, following surpluses of $86 million in September 2024 and $29 million in August 2024.
Export and Import Dynamics
During July-October FY2025, goods exports grew by 8.7% to $10.5 billion, up from $9.7 billion in the same period last year. This growth was driven by remarkable increases in commodities such as rice (52.5%), fruits and vegetables (18.3%), sugar (414%), knitwear (18.7%), bedwear (13.2%), readymade garments (25.4%), and cement (12.4%). However, imports rose by 13.0% to $18.8 billion, compared to $16.7 billion last year, widening the goods trade deficit to $8.3 billion from $7.0 billion.
The major contributors to the import increase included palm oil (6.1%), petroleum crude (16.8%), liquefied natural gas (11.0%), raw cotton (68.9%), fertilizer (121.4%), machinery (15.2%), and iron and steel (6.1%).
Service Trade and IT Exports
Service exports also recorded an increase of 8.0%, reaching $2.6 billion, while service imports rose by 2.4% to $3.6 billion, resulting in a reduced service trade deficit of $1.0 billion compared to $1.1 billion last year. Notably, IT exports surged by an impressive 34.9% to $1.2 billion, compared to $0.9 billion in the previous year, underscoring the sector’s growing contribution to the economy.
Workers’ Remittances and FDI
Workers’ remittances provided a significant boost to the external account, with inflows amounting to $11.9 billion, a 34.7% increase from $8.8 billion last year. Saudi Arabia remained the largest contributor to these inflows.
Foreign Direct Investment (FDI) also rose by 32.3%, reaching $904 million. Key contributors included China with $414 million (45.8% share), Hong Kong with $100 million (11.0% share), and the UK with $94 million (10.4% share). The power sector attracted the largest share of FDI, amounting to $414 million (46%), followed by oil and gas exploration at $104 million (11.5%).
On the portfolio investment front, private-sector Foreign Portfolio Investment (FPI) saw a net outflow of $97.2 million, while public FPI recorded a net inflow of $283 million.
Reserves and Outlook
As of November 8, 2024, Pakistan’s total liquid foreign exchange reserves stood at $16.0 billion, with the State Bank of Pakistan holding $11.3 billion. This improved reserve position, alongside growing exports, remittances, and foreign investment, signals a strengthening external sector.
The consistent current account surplus reflects the government’s focus on economic stabilization and its efforts to address structural challenges. However, sustaining this positive trend will require targeted measures to curb import growth, boost exports further, and attract higher levels of foreign investment.
Pakistan’s improving external sector provides a solid foundation for enhanced economic stability, offering optimism for continued recovery and growth in the coming months.