Pakistan’s Current Account Deficit Declines in July 2025

The State Bank of Pakistan (SBP) revealed on Tuesday that Pakistan’s current account deficit experienced a substantial decrease of 27 percent in July 2025.

The SBP indicated that the nation’s current account showed a deficit of $254 million in the initial month of fiscal year 2026. This represents an improvement of $94 million compared to the $348 million deficit recorded during the corresponding period in the previous fiscal year 2025.

Notably, in June, the current account demonstrated a surplus of $328 million. This brought the cumulative surplus for fiscal year 2025 to $2.1 billion, which is equivalent to 0.5 percent of the GDP. This marked the first annual surplus witnessed in 14 years, largely attributed to a significant surge in remittances from overseas workers.

However, policymakers anticipate a shift back into deficit for the current account during this fiscal year. This expected change is primarily due to a projected increase in import bills resulting from heightened domestic demand. In the prior fiscal year, remittances from workers played a crucial role in offsetting the expanding trade deficit.

Looking ahead, the SBP projects a deceleration in the growth rate of worker remittances, influenced by a high base effect and recent adjustments to incentive schemes for remittances sent from abroad. Concurrently, the trade deficit is expected to widen due to greater import demand, aligning with the improving domestic economic activity.

Given the anticipated slower growth in remittances and the higher import bill, the SBP forecasts the current account deficit to range between 0 and 1 percent of GDP in fiscal year 2026. The SBP’s foreign exchange reserves had already reached $14 billion by the close of the last fiscal year, boosted by planned inflows in June.

Regarding financing, inflows are poised to increase during this fiscal year, partly driven by expectations of higher private flows following the recent upgrade in the country’s credit rating. Based on this evaluation, the SBP projects its foreign exchange reserves to increase by $3.5 billion, reaching $17.5 billion by the conclusion of June 2026.

According to the SBP, Pakistan’s goods import bill saw a 12 percent increase, reaching $5.422 billion in June 2025, up from $4.849 billion in June 2024. Conversely, exports displayed a 16 percent growth, amounting to $2.743 billion in June 2025 compared to $2.361 billion in June 2024. Overall, the goods trade deficit rose by 7 percent, settling at $2.679 billion in the first month of this fiscal year.