Pakistan’s current account deficit narrowed significantly to $98 million in August 2026, marking the smallest monthly shortfall since April as higher workers’ remittances helped offset the country’s persistent trade deficit. The latest figures from the State Bank of Pakistan’s Balance of Payments data show that the August deficit was substantially lower than the $445 million shortfall recorded in July and also improved from the $324 million deficit reported for August 2025.
The monthly deficit contracted by around 78% compared with July, while the year-on-year reduction stood at approximately 70%. The improvement came mainly from stronger external inflows rather than a broad-based correction in the merchandise trade position. While imports declined during August compared with the previous month, exports also recorded a sharper monthly fall, leaving Pakistan with a sizeable goods trade deficit. The data therefore points to remittances playing a central role in keeping the current account deficit contained during the month.
For the first two months of fiscal year 2027, covering July and August, Pakistan recorded a cumulative current account deficit of $543 million. This represents a 36.3% reduction from the $853 million deficit recorded during the corresponding period of the previous fiscal year. Workers’ remittances provided much of the support during the period, with total inflows rising 14.7% year-on-year to $7.29 billion. The increase in remittances helped offset pressures emerging from the trade account during the early months of the new fiscal year.
The trade balance in goods and services, however, moved in the opposite direction. The combined deficit widened by 13.2% year-on-year to $6.75 billion during July-August. The increase indicates that the improvement in the current account has not been accompanied by a comparable improvement in the underlying trade position. Rising domestic activity and energy-related import requirements may be contributing to import demand, while export growth has remained comparatively weak.
Goods imports declined 10.8% month-on-month in August, falling to $5.49 billion from $6.15 billion in July. Goods exports also declined during the month, but at a faster rate of 17.6%, reaching $2.46 billion compared with $2.99 billion in July. As a result, the monthly goods trade deficit narrowed only modestly to $3.03 billion from $3.16 billion in July. The month-on-month improvement was therefore partly linked to the timing and scale of trade flows rather than a significant change in the overall trade balance.
The year-on-year figures provide a different picture. Goods imports in August were 9.3% higher than the same month last year, while exports declined by 1.1%. This combination pushed the goods trade deficit 19.5% higher than in August 2025. After including services, Pakistan’s overall trade shortfall reached $3.31 billion during the month, representing an 11.1% year-on-year increase. The trade deficit has now recorded year-on-year expansion in nine of the past twelve months, highlighting continued pressure from the external trade side.
Workers’ remittances remained the strongest source of support for the external account. Pakistan received $3.66 billion in workers’ remittances during August, compared with $3.14 billion in the same month last year, representing growth of 16.5%. Remittances were also slightly higher than the $3.63 billion received in July. The latest figure means monthly inflows have remained above $3.4 billion in eleven of the past thirteen months. The $4.25 billion recorded in May 2026 remains the highest monthly inflow during this period.
Secondary income, which is largely driven by workers’ remittances, increased to $3.89 billion in August. This was sufficient to offset a $672 million primary income outflow. Primary income outflows include payments associated with areas such as profit repatriation and debt servicing. The continued strength of secondary income has therefore provided an important cushion against the pressure created by trade and primary income flows.
Pakistan’s foreign exchange reserves also remained relatively stable during August. The State Bank of Pakistan’s gross foreign exchange reserves stood at $18.48 billion at the end of the month, compared with $18.34 billion at the end of July. On a year-on-year basis, the reserve position was 18.1% higher than the $15.66 billion recorded at the end of August 2025. Although reserves remained below the June 2026 peak of $19.69 billion, the year-on-year increase indicates that the country has maintained a stronger reserve position compared with the previous year.
Despite the improvement in the current account, Pakistan’s overall balance of payments position moved into a deficit of $118 million in August. This measure includes the current, capital and financial accounts and compares with a $1.39 billion surplus recorded in July. The reversal was mainly associated with financial account outflows, particularly repayments under other-investment flows, rather than pressure caused by a major drawdown in foreign exchange reserves.
The August figures present a mixed picture for Pakistan’s external sector. The sharp decline in the current account deficit and continued growth in remittances have provided support during the opening months of fiscal year 2027. At the same time, the widening trade deficit, slower export performance and higher year-on-year imports remain important factors for the balance of payments. With remittances currently carrying much of the adjustment burden, the direction of exports, imports and external financing will remain important for the country’s current account position in the months ahead.
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