ISLAMABAD: Pakistan’s current account recorded a surplus of $0.7 billion for the period July-February of the fiscal year 2025 (FY25), a significant turnaround from the $1.7 billion deficit reported during the same period last year. This improvement is attributed to a variety of factors, including a reduction in the trade deficit and strong remittance inflows.
According to the latest figures from the State Bank of Pakistan’s (SBP) Balance of Payments (BoP) summary for February 2025, the country’s financial position showed positive momentum. The surplus in the current account for the period marks a notable shift after several years of deficits, driven largely by a surge in worker remittances and a gradual decline in the goods trade deficit.
Key factors contributing to the surplus include:
1. Exports of Goods: Exports rose by 7.2% compared to the previous year, totaling $21.8 billion, a positive sign for the country’s foreign exchange earnings.
2. Imports of Goods: Imports saw a slower increase, growing by 11.4% to $38.3 billion, as compared to the same period last year. This was due to government efforts to reduce the import of non-essential goods and a moderation in domestic demand.
3. Remittances: Worker remittances remained a strong contributor, totaling $23.97 billion in the period, up from $18.08 billion last year. These inflows have been vital in stabilizing Pakistan’s foreign exchange reserves.
4. Reduction in Services Trade Deficit: The trade deficit in services also narrowed, contributing to the overall improvement in the balance of payments. The goods and services trade deficit stood at $18.8 billion in Jul-Feb FY25, an improvement from $24.6 billion in the same period last year.
While the primary income deficit widened slightly due to higher foreign debt servicing, the overall current account balance showed resilience, aided by Pakistan’s strategic economic adjustments and ongoing efforts to attract foreign investment. The balance on secondary income also saw a positive uptick, driven by higher remittances and transfers from the Pakistani diaspora.
However, the financial account remained under pressure, with a net borrowing of $401 million recorded in the same period, reflecting ongoing challenges in securing consistent foreign investment. Despite this, Pakistan’s foreign exchange reserves remained stable, bolstered by inflows from remittances and multilateral financial assistance.
As the government prepares for the upcoming budget for FY26, policymakers will be closely monitoring these developments. While the surplus is a positive sign, experts caution that addressing the trade imbalance and diversifying the economy will be crucial for sustaining long-term stability.
The current account surplus is a welcome boost for Pakistan, providing much-needed fiscal relief as the country works towards stabilizing its economy and improving its external position.
