Pakistan recorded a current account deficit of $594 million in the first quarter of FY26, widening from a deficit of $502 million during the same period last year, according to official data released by the State Bank of Pakistan and compiled by Arif Habib Limited. The figures underscore persistent external sector pressures despite some encouraging short-term improvements in the balance of payments.
In a positive development, the country posted a current account surplus of $110 million in September 2025, marking a significant turnaround from a deficit of $52 million in September 2024 and a deficit of $325 million in August 2025. This shift signals some recovery momentum, though not enough to offset the overall quarterly deficit.
The improvement in September was largely driven by an uptick in export performance. Exports of goods rose by 1 percent year-on-year to $2.63 billion, reflecting stronger demand for key Pakistani products in global markets. Exports of services showed an even sharper rise, increasing 20 percent to $797 million. This growth in the services sector is attributed to expanding IT exports, improved logistics, and greater diversification in service offerings.
Imports, however, also increased. Imports of goods climbed 7 percent year-on-year to $5.02 billion, while imports of services grew 3 percent to $995 million. The higher import bill continues to put pressure on the current account, offsetting gains from export growth. Despite these challenges, the narrowing of the monthly deficit in September reflects some rebalancing in trade dynamics.
Workers’ remittances provided additional support, rising 11 percent year-on-year to $3.18 billion in September. This increase is linked to stable inflows from the Gulf region and improved formal remittance channels. The balance on secondary income, which includes remittances and other transfers, improved by 10 percent to $3.37 billion, further cushioning external account pressures.
Despite these improvements, the quarterly trade deficit remained sizable. The balance on trade in goods stood at negative $7.53 billion, while the trade in services recorded a deficit of $931 million during the first quarter of FY26. These figures highlight the structural imbalance between the country’s import needs and its export capacity.
The persistent trade gap has been a defining feature of Pakistan’s external account over the past year. Historical data shows fluctuations in the current account balance, with occasional monthly surpluses unable to reverse the overall trend of deficits. Policymakers are closely monitoring these trends as they weigh their impact on the exchange rate, foreign reserves, and broader economic stability.
Economic analysts note that sustained growth in exports and remittances is critical to narrowing the current account gap. However, import rationalization and better trade balance management remain essential to achieving sustainable external sector stability. The September surplus offers a temporary boost, but further structural reforms and export-oriented strategies are needed to maintain momentum in the months ahead.
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