By Moaaz Manzoor

Pakistan recorded a $139 million current account deficit in FY2025-26, reversing a $1.838 billion surplus in FY2024-25 as the merchandise trade imbalance widened sharply.

According to provisional State Bank of Pakistan data, the FY2025-26 deficit was equivalent to 0.03% of gross domestic product, compared with a surplus of 0.45% of GDP in FY2024-25.

The main pressure came from trade in goods. Merchandise exports on a free-on-board basis declined to $30.843 billion in FY2025-26 from $32.343 billion in FY2024-25, a reduction of $1.500 billion.

Goods imports increased by $5.320 billion to $64.466 billion in FY2025-26 from $59.146 billion in the previous fiscal year.

As a result, Pakistan’s merchandise trade deficit widened by $6.820 billion to $33.623 billion in FY2025-26 from $26.803 billion in FY2024-25.

The imbalance was particularly visible in June 2026. The country posted a monthly current account deficit of $649 million, compared with a surplus of $220 million in June 2025. During the final quarter of FY2025-26, covering April to June 2026, the current account recorded a cumulative deficit of $425 million.

Goods exports stood at $2.595 billion in June 2026, broadly unchanged from $2.591 billion in June 2025. Goods imports, however, rose to $6.147 billion from $5.020 billion over the same period.

Consequently, the monthly merchandise trade deficit increased to $3.552 billion in June 2026 from $2.429 billion in June 2025.

An improvement in services trade partly offset the pressure created by merchandise imports.

Services exports rose to $10.034 billion in FY2025-26 from $8.450 billion in FY2024-25, while services imports increased to $11.925 billion from $11.286 billion.

The services trade deficit therefore narrowed to $1.891 billion in FY2025-26 from $2.836 billion in FY2024-25. Despite this improvement, the combined deficit on trade in goods and services widened to $35.514 billion from $29.639 billion because of the larger merchandise imbalance.

Workers’ remittances provided the strongest support to the current account. Remittance inflows increased by $3.285 billion to $41.585 billion in FY2025-26 from $38.300 billion in FY2024-25.

The overall secondary income balance, which includes workers’ remittances and other current transfers, rose to $43.813 billion in FY2025-26 from $40.315 billion in the preceding fiscal year.

Pakistan’s primary income deficit, covering items including investment-related payments, narrowed to $8.438 billion in FY2025-26 from $8.838 billion in FY2024-25.

Even with that improvement, the combined deficit on goods, services and primary income widened to $43.952 billion in FY2025-26 from $38.477 billion in FY2024-25.

Excluding official transfers, the current account recorded a deficit of $679 million in FY2025-26, compared with a surplus of $1.332 billion in FY2024-25.

Foreign exchange reserves strengthened despite the current account reversal. The SBP’s gross reserves stood at $19.689 billion at the end of June 2026, up from $15.836 billion at the end of June 2025.

The data indicate that higher remittances and improved service earnings absorbed most of the pressure from the widening goods trade deficit, limiting the full-year current account shortfall to $139 million.

The SBP noted that merchandise trade figures used in balance of payments calculations are based on exchange records and may differ from customs-based trade statistics.

Credit: INP-WealthPk