Abdul Ghani

Pakistan’s external account position showed signs of renewed strength as the current account recorded a surplus in September 2025, supported by higher exports, strong remittance inflows, and stable foreign-exchange reserves.

According to the Finance Division’s Monthly Economic Update & Outlook (October 2025), the current account swung to a surplus of $110 million in September, helping contain the cumulative deficit to $594 million during the first quarter of FY2026 compared with $502 million in the same period last year.

The report said exports of goods increased 6.5 percent to $7.9 billion during July–September, while imports grew 8.3 percent to $15.4 billion, resulting in a trade deficit of $7.5 billion. Key export gains were seen in knitwear (12.2 percent), garments (6.1 percent), and bedwear (7.3 percent).

Imports, meanwhile, were driven by higher petroleum products (3.1 percent) and palm oil (34.1 percent), though crude oil imports declined marginally. Service exports rose 14.8 percent to $2.2 billion, while service imports grew 11.2 percent to $3.1 billion, keeping the service trade deficit largely unchanged at around $931 million.

The Finance Division said the overall external position remained stable, supported by a surge in workers’ remittances, which rose 8.4 percent to $9.5 billion in Q1-FY2026. The largest inflows came from Saudi Arabia, accounting for 24.2 percent, followed by the UAE at 20.8 percent.

IT exports also posted strong growth, rising 20.4 percent to $1.1 billion. Foreign direct investment (FDI), however, fell to $568.8 million from $864.6 million last year, mainly due to lower inflows in non-energy sectors. The report identified China ($188.6 million) and Hong Kong ($96 million) as key sources of investment, with the power and financial sectors attracting most inflows.

Foreign portfolio investment showed net outflows of $511.8 million, while private portfolio investment saw outflows of $121.5 million. Despite this, total foreign-exchange reserves improved to $19.9 billion by mid-October, including $14.5 billion held by the State Bank of Pakistan.

Economists said the improvement in the external balance reflected the impact of better export competitiveness, controlled import growth, and resilient remittances. “Pakistan’s external stability has improved significantly, reducing exchange-rate volatility and strengthening investor confidence,” one analyst noted.

The Finance Division projected that the current account deficit would remain within 1 percent of GDP for FY2026, aided by strong remittance inflows and planned official financing. “The government’s external financing strategy continues to focus on concessional inflows and debt reprofiling to strengthen reserves,” it said.

Credit: INP-WealthPk