Pakistan’s current account deficit (CAD) has surged dramatically, widening by 255% during the first four months of fiscal year 2025-26, compared to the same period last year, according to the latest Balance of Payments data released by the State Bank of Pakistan (SBP) on Monday. The deficit, a key indicator of the country’s external sector health, reached $733 million from July to October FY26, up sharply from $206 million in the corresponding months of FY25.
Analysts point to a combination of soaring imports and declining exports as the primary drivers behind this sharp deterioration. Trade data from the Pakistan Bureau of Statistics (PBS) indicates that imports jumped by 15.13%, reaching $23 billion during the first four months of FY26, compared to $20 billion in the same period last year. This surge reflects growing demand for machinery, raw materials, and consumer goods, compounded by rising global commodity prices.
At the same time, exports fell by 4%, sliding to $10.45 billion from $11 billion in the first four months of FY25. The decline in exports was largely attributed to sluggish global demand, currency fluctuations, and ongoing challenges in Pakistan’s manufacturing and textile sectors. The widening gap between imports and exports resulted in a trade deficit of $12.58 billion, a 38% increase from $9.12 billion during the same period in the previous fiscal year.
Despite these pressures, the balance of payments received some relief from remittances. Workers’ remittances increased to $13 billion in July–October FY26, up from $11.85 billion in the same period last year. While this inflow provides a crucial buffer against external financing pressures, it was insufficient to offset the steep rise in the trade deficit.
A closer look at October 2025 data reveals a current account deficit of $112 million, compared with a surplus of $296 million in October 2024, underscoring the month-to-month volatility in Pakistan’s external accounts.
Historically, Pakistan’s external balances have experienced significant swings. The country posted a current account surplus of $1.93 billion in FY25, following a deficit of $2 billion in FY24. These fluctuations highlight the structural vulnerabilities in Pakistan’s trade and external finance dynamics, including heavy reliance on imports, limited diversification of exports, and sensitivity to global economic conditions.
Economists warn that if import growth continues at the current pace while exports remain sluggish, the current account deficit could further pressure the Pakistani rupee and increase dependence on external financing. Policymakers may need to intensify efforts to boost export competitiveness, manage import growth, and enhance remittance inflows to stabilize the country’s external accounts.
The latest SBP data reinforces the urgent need for strategic interventions to address Pakistan’s widening external deficit, particularly in an environment of global economic uncertainty and domestic fiscal pressures.
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