Pakistan’s external sector remained resilient at the beginning of fiscal year 2027, supported by stronger exports, higher workers’ remittances and improvements in services and primary income balances. Goods and services exports increased to $3.94 billion in July 2026 from $3.48 billion in the same month last year. Goods exports alone rose by 9.4 percent year on year to $3.01 billion, with petroleum products, cotton yarn and readymade garments among the key categories contributing to the increase.
Imports also increased during the month, reflecting stronger demand for machinery, transport equipment and metals. Goods and services imports rose to $7.31 billion in July 2026 from $6.46 billion a year earlier. Goods imports increased by 13.4 percent to $6.15 billion, while petroleum imports moved in the opposite direction and declined by 5.2 percent. With imports growing at a faster pace than exports, Pakistan’s goods and services trade deficit widened to $3.37 billion from $2.98 billion in July 2025.
Despite the wider trade deficit, improvements in other components of the external account helped reduce pressure on the overall current account. The services deficit narrowed to $228 million in July 2026 from $304 million a year earlier, while the primary income deficit also recorded an improvement. These changes partly offset the increase in the merchandise trade gap and supported a better overall external account position during the month.
Workers’ remittances continued to provide an important source of foreign exchange for Pakistan. Remittance inflows increased by 13 percent year on year to around $3.6 billion in July 2026. Higher secondary income, combined with improvements in the services and primary income balances, helped narrow Pakistan’s current account deficit to $328 million during the month compared with $529 million in July 2025.
The improvement in the current account position came despite the increase in imports. Stronger remittances provided additional foreign exchange inflows, while rising exports contributed further support to the external account. The combination of these inflows and improvements in services and primary income helped offset some of the pressure created by the wider goods and services trade deficit.
Financial inflows also remained positive during July 2026. Total foreign direct investment inflows stood at $304 million during the month, while net foreign direct investment reached $178.6 million after accounting for investment outflows. The positive net FDI position provided an additional source of external financing as Pakistan entered FY2027.
Portfolio investment also recorded a net inflow of $25.9 million during July 2026. This represented a reversal from the outflow recorded during the same period a year earlier, indicating an improvement in portfolio investment flows at the beginning of the new fiscal year. Together with foreign direct investment, the positive portfolio investment position supported Pakistan’s external financing position.
Foreign exchange reserves also remained at a comfortable level. Pakistan’s total foreign exchange reserves stood at $22.6 billion as of August 21, 2026, including $17.1 billion held by the State Bank of Pakistan. The level of reserves provides a significant buffer for the external account and supports the country’s capacity to manage international payment requirements amid continued uncertainty in global markets.
The export performance during July was supported by gains in petroleum products, cotton yarn and readymade garments. Goods exports increased from the previous year, while the broader goods and services export figure reached $3.94 billion. The improvement indicates stronger export activity at the beginning of FY2027 and provides additional support for foreign exchange earnings.
However, the increase in imports remains an important factor for Pakistan’s external position. Goods imports rose 13.4 percent year on year to $6.15 billion, with machinery, transport equipment and metals accounting for much of the increase. The decline in petroleum imports by 5.2 percent provided some relief, but overall goods and services imports still increased substantially compared with the previous year.
The external account therefore showed mixed movements during July 2026. The trade deficit widened because imports increased faster than exports, but the current account deficit still narrowed because of stronger remittances and better services and primary income balances. Positive financial inflows and higher foreign exchange reserves further strengthened the external position.
Pakistan’s external sector entered FY2027 with stronger foreign exchange inflows from workers’ remittances and exports, alongside positive investment flows and improved reserve levels. The narrowing of the current account deficit from $529 million in July 2025 to $328 million in July 2026 reflects the combined impact of these developments. At the same time, faster import growth and the widening trade deficit remain areas requiring attention as economic activity and domestic demand continue to recover.
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