Pakistan’s external sector is showing fresh signs of pressure, as the current account moved into deficit during the first eight months of fiscal year 2026, despite an improved performance in February.
According to the latest balance of payments data released by the State Bank of Pakistan, the country recorded a current account deficit of $700 million from July to February FY2026. This compares with a surplus of $479 million in the same period last year, pointing to underlying weakness in the recent economic recovery.
However, February offered some relief. The current account posted a surplus of $427 million during the month, a clear improvement from a deficit of $85 million in February 2025 and a surplus of $68 million in January 2026. Analysts say this was the largest monthly surplus since March 2025.
Trade gap widens
The main pressure on the external account continues to come from the widening trade deficit. In February alone, the trade gap rose to $2.67 billion, as exports stood at $2.48 billion while imports climbed to $5.15 billion.
For the July to February period, the overall trade deficit increased to $21.08 billion, compared with $16.49 billion a year earlier.
Exports during this period declined to $20.74 billion, down from $21.94 billion last year. In contrast, imports rose sharply to $41.82 billion, highlighting growing demand for foreign goods and higher import costs.
Remittances provide support
Remittances remained a key support for the external account, reaching $26.49 billion during the eight-month period. Experts say that without these inflows, the current account deficit could have been significantly higher.
At the same time, analysts caution that relying mainly on remittances and external borrowing is not enough for long-term stability. Pakistan’s exports remain largely concentrated in low value-added sectors, particularly textiles, where competition from regional economies remains strong.
Meanwhile, the primary income account also stayed under pressure, recording a deficit of $5.64 billion during July to February. This was mainly due to profit repatriation by foreign investors and payments on external debt.
Foreign direct investment in the financial account remained limited, offering little relief.
Economists say that without structural reforms, including export diversification, improved industrial output and more efficient energy use, Pakistan’s external position is likely to remain vulnerable to global price changes and rising import pressures.
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