Pakistan’s Current Account Deficit Widens 45pc in Jul-Aug FY26

Pakistan’s external account is once again facing renewed stress as rising imports outpaced modest growth in exports. According to fresh data from the State Bank of Pakistan (SBP), the country recorded a current account deficit of USD 624 million in the first two months of FY26, compared with USD 430m in the same period last year.

In August alone, the deficit jumped to USD 245m—a 191% increase compared to August 2024. However, it was notably lower than July 2025, when the shortfall had reached USD 379m.

Trade Gap Driven by Rising Imports

Exports of goods rose 10.2% YoY to USD 5.29b in Jul-Aug, supported by textiles and IT services. But imports expanded even faster, crossing USD 10.4b, widening the trade deficit to USD 5.1b.

While IT and service exports showed healthy momentum, higher energy and machinery imports, coupled with transport and travel spending, added to the pressure. Services trade deficit widened to USD 708m in Jul-Aug from USD 604m last year.

Current account deficit (CAD) rose 45% year-on-year, reaching USD 624m in Jul-Aug FY26.

August 2025 deficit stood at USD 245m, up 191% YoY, but 35% lower than July 2025.

Imports surged to USD 10.4b, outpacing exports of USD 5.3b.

Remittances rose 7% YoY, providing partial support at USD 6.4b in two months.

Primary income deficit widened to USD 1.49b in Jul-Aug, driven by profit repatriation and debt payments.

SBP reserves stable at USD 14.3b, projected to reach USD 15.5b by Dec 2025 with inflows.

Remittances Cushion the Blow

On a positive note, workers’ remittances increased by 7% YoY, totaling USD 3.1b in August and USD 6.4b over two months. This steady inflow cushioned some of the pressure from rising imports and debt repayments.

Structural Challenges Remain

Economists note that the primary income deficit, mostly profit repatriations and debt servicing, continues to be a structural drag—rising to USD 1.49b in Jul-Aug FY26. Meanwhile, foreign investment outflows of USD 323m added to financing stress.

The SBP has also warned that flood-related crop losses may keep inflation high and push the current account deficit upward. Still, it expects the CAD to remain within the 0–1% of GDP range in FY26, supported by upcoming inflows and improved US market access.

Despite the widening gap, the SBP’s reserves remain stable at USD 14.3b, with projections to touch USD 15.5b by December 2025—a sign that external financing commitments are on track.

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