Pakistan’s external sector continued to show signs of stability in FY2025, backed by a steady rise in exports, strong inflows of workers’ remittances, and a significant uptick in foreign direct investment (FDI), despite a parallel increase in imports. According to the latest data for the period of July to February FY2025, the country recorded a current account surplus of $691 million, a stark contrast to the $1.73 billion deficit recorded in the same period last year. This turnaround reflects improved economic fundamentals and increased inflows from key external sources.
However, for the month of February 2025, the current account registered a modest deficit of $12 million, compared to a surplus of $71 million in February 2024. While the monthly figure shows a slight dip, the overall external balance remains strong for the fiscal year to date.
Merchandise exports during the eight-month period rose by 7.2 percent year-on-year, reaching $21.8 billion compared to $20.4 billion last year. Despite this growth in exports, imports surged by 11.4 percent to $38.3 billion, resulting in a goods trade deficit of $16.5 billion, higher than last year’s $14.1 billion. The widening trade gap was offset to some extent by rising service exports and record-high remittances.
Data from the Pakistan Bureau of Statistics revealed that several key export commodities showed exceptional growth. Sugar exports saw an astronomical increase of 1,831.7%, followed by notable gains in tobacco (105.9%), petroleum products (77.3%), and pharmaceutical products (55.3%). The textile sector, a mainstay of Pakistan’s export base, also performed well with readymade garments up 19.9%, knitwear up 17.1%, and bedwear up 13.1%. Other notable increases included plastic materials (27.4%) and engineering goods (19.1%).
On the import side, the rise was driven by essential and industrial inputs. Major increases were recorded in soybean oil (90.4%), palm oil (24.3%), machinery (15.6%), petroleum crude (6.5%), liquefied petroleum gas (45.5%), and raw cotton (228.7%), indicating a pickup in industrial and manufacturing activity.
The services sector also witnessed growth, with service exports rising to $5.5 billion (up by 6.0%) while service imports grew to $7.7 billion (up 12.0%). This resulted in a service trade deficit of $2.3 billion, up from $1.7 billion last year. Within this segment, the performance of Pakistan’s IT sector stood out, with IT exports increasing by a healthy 25.5% to reach $2.5 billion compared to $2.0 billion in the same period last year.
One of the most positive developments has been the 32.5% surge in workers’ remittances, which totaled $24.0 billion during Jul-Feb FY2025, up from $18.1 billion a year earlier. Saudi Arabia led the inflows with a 24.6% share, followed by the UAE (20.3%), highlighting the continued importance of the Gulf region in supporting Pakistan’s external finances.
Foreign Direct Investment (FDI) also posted strong growth, rising by 41.0% to $1,618.4 million. China contributed the largest share at $661.8 million (40.9%), followed by the UK ($167.0 million) and Hong Kong ($160.4 million). The power sector attracted the most investment ($578.2 million), followed by financial services ($466.4 million) and oil & gas exploration ($196.6 million). However, the private sector witnessed a net outflow of $253.6 million in Foreign Portfolio Investment (FPI), while public sector FPI recorded a modest net inflow of $42.6 million.
Pakistan’s total liquid foreign exchange reserves stood at $16.0 billion as of March 14, 2025, with the State Bank of Pakistan (SBP) holding $11.1 billion. The country’s external resilience, built on diversified export growth, surging remittances, and improved investor confidence, provides a much-needed buffer against global economic uncertainties and helps maintain macroeconomic stability heading into the latter part of FY2025.