Qudsia Bano

Pakistan’s external current account recorded a surplus of $1.812 billion during the first 11 months of Fiscal Year 2024-25 – a sharp turnaround from $1.572 billion deficit posted during the same period last year. This improvement, as reported by the State Bank of Pakistan (SBP), is largely attributed to a surge in workers’ remittances and a strong secondary income balance, according to WealthPK.

From July 2024 to May 2025, remittances increased to $34.891 billion, a significant rise from $27.093 billion in the corresponding period of the previous fiscal year. The balance on secondary income also grew to $36.767 billion, compared to $28.845 billion last year, helping to offset the widening trade deficit in goods and services.

Despite the positive annual trend, May 2025 saw a current account deficit of $103 million, reversing the $47 million surplus recorded in April. This fluctuation was primarily driven by an expanding trade deficit, with imports of goods in May amounting to $3.048 billion compared to $2.629 billion in April.

Experts view the surge in remittances as the backbone of Pakistan’s current account surplus and a stabilising factor for the country’s external finances. Talking to WealthPK, Hasan Rizvi, senior analyst at Bank Alfalah, said that the resilience of remittance inflows has been remarkable, especially in a year marked by global economic uncertainty.

“Pakistani workers abroad continue to send record amounts back home, driven by both supportive policy measures and currency valuation dynamics. This inflow has played a critical role in bridging our external financing gap,” he said.

However, the data also reflects ongoing pressure on the trade front. The overall trade deficit in goods and services for the July-May period rose to $27.062 billion, up from $22.615 billion last year. The primary income account also recorded a higher deficit of $7.893 billion, slightly above last year’s $7.802 billion.

Nida Hassan, economic research expert at the Pakistan Business Council, noted that while remittance growth is a positive development, relying on it as a long-term fix is risky. “Remittances are volatile and subject to external labour market conditions. The current account balance would be vulnerable if inflows slow down or if imports pick up with any future rise in domestic demand,” she said.

She emphasized the need for structural reforms to boost exports and reduce dependence on imported goods. “The long-term solution lies in enhancing our productive capacity and diversifying export markets, not just counting on overseas workers,” she added.

While the $1.8 billion surplus provides some breathing space for Pakistan’s external account, experts warn that sustaining this momentum will require prudent macroeconomic management, continued policy support for remittances, and deeper reforms in trade and investment. As the Fiscal Year 2024-25 has ended, the focus should now shift to how these external sector trends will shape the country’s balance of payments outlook in 2025-26.

Credit: INP-WealthPk