Pakistan’s external sector showed mixed trends during the first half of FY2026 as improving domestic economic activity led to higher import demand, while remittance inflows and export performance continued to provide partial support to the balance of payments. During Jul–Dec FY2026, the current account posted a deficit of $1.2 billion, compared to a surplus of $0.96bn recorded in the same period last year, reflecting a widening trade gap amid rising imports.
Goods and services exports stood at $20.3bn during the period, broadly stable compared to $20.4bn last year. Within this, goods exports amounted to $15.5bn, while services exports remained a key area of strength. Services exports were primarily driven by information technology-related services, which increased by 19.8% to $2.2bn, highlighting the growing role of the IT sector in supporting Pakistan’s external earnings.
On the import side, goods and services imports increased significantly to $37.8bn during Jul–Dec FY2026, compared to $33.5bn in the corresponding period last year. Goods imports alone reached $31.3bn, reflecting increased demand for energy, raw materials, and consumer goods as economic activity gained momentum. As a result, the trade deficit in goods and services widened to $17.6bn, up from $13.1bn recorded last year.
According to Pakistan Bureau of Statistics data, export gains were observed in key textile categories, with knitwear exports rising by 4.1%, garments by 4.9%, and bedwear by 1.9%. These increases indicate some resilience in Pakistan’s core export sectors despite global economic challenges. However, higher imports offset these gains, particularly in essential commodities and energy-related items.
Among major import items, increases were recorded in petroleum products, which rose by 5.1%, petroleum crude by 11.2%, and palm oil by 28.8%. The rise in energy imports reflects both higher demand and price dynamics, contributing to the widening trade deficit during the period under review.
Remittance inflows continued to play a critical role in supporting the external account. During Jul–Dec FY2026, remittances increased by 10.6% to $19.7bn. Inflows were primarily led by Saudi Arabia, which accounted for 23.9% of total remittances, followed by the United Arab Emirates with a share of 20.7%. The sustained growth in remittances provided an important buffer against the impact of higher imports and weaker capital inflows.
In contrast, net foreign direct investment inflows declined during the period, amounting to $808.1m. China remained the largest source of net FDI inflows at $422.9m, followed by Hong Kong at $163.8m. Sector-wise, the power sector attracted $470.9m in net inflows, while financial services received $401.5m. However, the communications sector recorded a net outflow of $411.4m, weighing on overall investment figures.
Portfolio investment flows also remained under pressure, with private and public foreign portfolio investment recording net outflows of $225.1m and $375.5m, respectively. These outflows reflect cautious investor sentiment amid global financial uncertainty and domestic economic adjustments.
Despite these pressures, Pakistan’s foreign exchange reserves remained stable. As of January 16, 2026, total foreign exchange reserves stood at $21.3bn, including $16.1bn held by the State Bank of Pakistan, providing a degree of comfort in managing external financing needs going forward.
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