By Abdul Ghani

Pakistan’s current account deficit narrowed by more than 36% to $543 million during July-August FY2026-27. Stronger export earnings and a 14.7% increase in workers’ remittances supported the external sector, successfully cushioning the impact of imports growing faster than exports.

The current account deficit declined from $853 million in July-August 2025 to $543 million in the corresponding period of 2026, according to the Ministry of Planning, Development and Special Initiatives' Monthly Development Update – September 2026, available with Wealth Pakistan.

The improvement amounts to a reduction of $310 million, or approximately 36.3%, in the external-account shortfall compared with the same period last year.

The narrowing came despite a substantial increase in the country’s import bill. Total imports of goods and services increased 11.1% to $14.008 billion during July-August 2026, compared with $12.607 billion in the corresponding period of the previous year.

The Planning Ministry linked the increase in imports to stronger domestic economic activity and rising demand for productive and capital goods, indicating that at least part of the higher import demand was boosted by expanding economic activity rather than consumption alone.

Exports also strengthened, although at a slower pace than imports.

Total exports of goods and services rose 9.2% to $7.256 billion during the first two months of FY2026-27, from $6.643 billion in the corresponding period a year earlier.

Within merchandise trade, goods exports increased 7.04% year-on-year to $5.46 billion, compared with $5.10 billion in July-August FY2025-26.

Textiles remained Pakistan’s largest export group and recorded 6.76% growth to $3.41 billion. The increase in goods exports was also supported by higher shipments of food, petroleum products, chemicals, leather, surgical goods and other manufactured products.

Services exports received particularly strong support from the technology sector. Exports of ICT services increased 17.4% to $811 million from $691 million, while August alone produced a record $394 million in ICT export earnings, up 16.91% year-on-year.

Workers’ remittances provided another major source of foreign exchange support during the period.

Remittance inflows reached $7.287 billion in July-August FY2026-27, representing growth of 14.7% from $6.353 billion in the corresponding period last year.

In absolute terms, overseas Pakistanis sent home about $934 million more during the first two months of the fiscal year than in the corresponding period of FY2025-26.

The combination of higher merchandise exports, rapidly growing ICT earnings and stronger remittance inflows helped support the external position even as demand for imports strengthened.

The September update describes economic activity at the start of FY2026-27 as resilient, with external-sector indicators maintaining positive momentum. It says growth in exports and remittances has reinforced external stability.

The current account performance also represents an improvement compared with the deficit reported for June 2026, which stood at $814 million, according to the ministry.

However, the trade figures show that the external sector continues to face pressure from an import bill that is expanding faster than export earnings. Imports of goods and services increased by around $1.4 billion year-on-year, compared with an increase of about $613 million in exports of goods and services during July-August.

The Planning Ministry said sustaining the economic recovery would require balancing price stability with continued export promotion, fiscal discipline and structural reforms to ensure durable and inclusive growth.

The latest figures nevertheless show a stronger external-account position at the beginning of FY2026-27, with the current account deficit falling by more than a third year-on-year to $543 million, even as rising economic activity pushed imports higher.

Credit: INP-WealthPk