Qudsia Bano

Pakistan’s external account showed further stability as the current account registered a surplus of $110 million in September 2025, helping contain the Q1-FY 2026 deficit to $594 million, according to the State Bank of Pakistan’s latest Monetary Policy Statement issued Monday.

The central bank said the figures were broadly in line with its expectations and reflected a favorable mix of moderate export growth, resilient workers’ remittances and continued financial inflows. As a result, the SBP’s foreign-exchange reserves rose to $14.5 billion as of October 17 despite the repayment of a $500 million Eurobond.

The Monetary Policy Committee (MPC) said imports had expanded in tandem with rising economic activity, while exports continued to grow modestly. Although the trade deficit widened slightly, strong remittance inflows and positive net financial flows offset its impact.

Going forward, the central bank expects imports to gain further traction as the economy recovers. However, it foresees the overall current account deficit remaining within its earlier projected range of 0-1 percent of GDP for FY 2026. The contained deficit, together with planned official inflows, is projected to raise reserves to $15.5 billion by December 2025 and around $17.8 billion by June 2026.

“The recent build-up in foreign-exchange reserves and stable external position reflect the impact of prudent macroeconomic management and the staff-level agreement with the IMF on the Extended Fund Facility and Resilience and Sustainability Facility reviews,” the statement noted.

The MPC acknowledged that global trade headwinds and volatile oil prices continued to pose risks to the external outlook. However, it added that Pakistan’s gradual export recovery in textiles, food and engineering products, coupled with the revival of services exports, could provide offsetting support.

The central bank also highlighted that the post-flood import requirements had turned out lower than expected, reducing pressure on the external balance. The monetary stance and fiscal discipline, it said, would help sustain a manageable balance of payments position throughout FY 2026.

Analysts expect the current account to remain in a mild surplus or close to balance in the near term, as import growth remains aligned with the economic recovery. Stable reserves are likely to support the rupee and boost investor confidence, while keeping the real effective exchange rate within a competitive range.

The SBP emphasized that strengthening external and fiscal buffers was essential to safeguard macroeconomic stability and absorb potential future shocks. It reiterated that sustained export diversification and investment in value-added industries were key to achieving long-term external sustainability.

With reserves forecast to rise by more than $3 billion over the next eight months, the SBP expressed confidence that Pakistan was well-placed to meet external obligations and maintain exchange rate stability through the rest of the fiscal year.

Credit: INP-WealthPk