By Farooq Awan

Pakistan’s current account deficit narrowed by about 38% to $328 million in July 2026, despite imports growing faster than exports and widening the goods and services trade deficit, as stronger remittances and improved services and primary income balances provided support to the external account.

According to the Finance Division’s Monthly Economic Update & Outlook – August 2026, available with Wealth Pakistan, the current account deficit declined from $529 million in July 2025 to $328 million in July 2026.

The improvement came despite a widening trade imbalance. Exports of goods and services increased to $3.94 billion from $3.48 billion a year earlier, while imports rose to $7.31 billion from $6.46 billion.

As imports grew faster than exports, the goods and services trade deficit widened to $3.37 billion, compared with $2.98 billion in July last year.

Goods exports increased 9.4% year-on-year to $3.01 billion, with key gains recorded in petroleum products, cotton yarn and readymade garments.

Goods imports, meanwhile, rose 13.4% to $6.15 billion, driven largely by increased imports of machinery, transport equipment and metals. Petroleum imports moved in the opposite direction, declining 5.2% year-on-year.

The pressure from the wider trade gap was partly offset by improvement elsewhere in the external account. The services deficit narrowed to $228 million from $304 million in the corresponding month of the previous year, while the primary income deficit also eased.

Workers’ remittances provided another major buffer, rising 13% year-on-year to $3.6 billion in July. The Finance Division said higher secondary income, along with improvements in services and primary income balances, helped contain the current account deficit despite the larger trade gap.

The report said the simultaneous improvement in remittances and exports strengthened foreign exchange inflows and provided an important buffer to the external account amid continued global uncertainty.

Foreign exchange reserves also remained at $22.6 billion as of August 21, 2026, of which $17.1 billion were held by the State Bank of Pakistan.

Looking ahead, the Finance Division expects external-sector conditions to remain broadly supportive, underpinned by improved exports, particularly textiles, sustained remittance inflows and continued export facilitation measures.

It said these trends should help contain pressures on the balance of payments and support reserve adequacy, while continued policy discipline and structural reforms would remain important for strengthening resilience to external shocks.

Credit: INP-WealthPk