Pakistan returns to current account surplus as record remittances offset trade deficit

Pakistan's external account posted a sharp turnaround in May 2026, with the country recording a current account surplus of $459 million on the back of record remittance inflows, according to data released by the State Bank of Pakistan (SBP) on Wednesday.

The surplus marked a significant improvement from the $276 million deficit recorded in April and contrasted with a deficit of $44 million in the same month last year.

The latest reading means Pakistan has now recorded current account surpluses in four of the past five months, highlighting a degree of resilience in the external sector despite persistent trade imbalances and rising import demand.

Analysts attributed the improvement primarily to a surge in overseas workers' remittances, which climbed to a historic monthly high of $4.25 billion in May. The inflows were up 15.4% from $3.69 billion received a year earlier and provided enough support to offset the country's sizeable trade gap.

"The primary driver of the current account surplus was record-high remittance inflows of $4.25 billion, which more than offset the goods trade deficit," said Waqas Ghani, Head of Research at JS Global.

Trade figures released by the central bank showed imports continued to exceed exports by a wide margin. Total imports of goods and services increased to $6.49 billion in May 2026 from $6.39 billion a year earlier, reflecting annual growth of nearly 2%.

Exports, meanwhile, rose at a slower pace. Pakistan's exports of goods and services reached $3.21 billion during the month, compared with $3.17 billion in May 2025, registering growth of just over 1%.

The stronger monthly performance also coincided with a continued build-up in the country's external buffers. Foreign exchange reserves, excluding CRR and SCRR balances, climbed to $17.27 billion, up 49% from $11.62 billion in the corresponding period last year.

Advisor to the Finance Minister Khurram Schehzad said the latest figures reflected improving macroeconomic stability and strengthening external fundamentals.

"Four surpluses in five months. A stronger external account is the foundation of sustainable high economic growth," he said.

Despite the positive monthly outcome, the cumulative position for the fiscal year remained below last year's level. During the first eleven months of FY26, Pakistan recorded a current account surplus of $255 million, compared with a surplus of $1.62 billion during the same period of FY25, a decline of roughly 84%.

Separately, the central bank's competitiveness indicators showed the rupee's trade-weighted valuation continued to edge higher.

Pakistan's Real Effective Exchange Rate (REER) increased to 106.15 in May from 105.84 in April. Economists generally view a REER above 100 as a sign that exports are becoming relatively less competitive, while imports become cheaper in comparison.

The Nominal Effective Exchange Rate (NEER) also posted a marginal increase, rising 0.03% month-on-month to a provisional value of 37.90 from 37.89 in April.

According to the SBP, the REER measures the relative price of domestic goods against those of major trading partners after accounting for exchange rate movements and trade weights, making it a key indicator of a country's external competitiveness.

The latest data suggests that while remittances continue to provide crucial support to Pakistan's balance of payments position, export growth remains subdued and the country's external account still relies heavily on inflows from overseas Pakistanis.