KARACHI, August 20, 2025 – The State Bank of Pakistan (SBP) has announced that Pakistan’s current account deficit shrank by 27% year-on-year (YoY) in July 2025, reflecting signs of relative improvement at the start of the new fiscal year.
According to the SBP, the current account recorded a deficit of $254 million in July 2025, compared to $348 million in the same month last year, showing a reduction of $94 million. The improvement follows June’s surplus of $328 million, which contributed to a rare cumulative surplus of $2.1 billion—equivalent to 0.5% of GDP—for FY25. That marked Pakistan’s first annual current account surplus in 14 years, driven largely by higher inflows of workers’ remittances.
However, policymakers remain cautious. The SBP warned that the current account may slide back into deficit during FY26 as import demand strengthens with rising domestic economic activity. While remittances were a key factor in offsetting the trade deficit last year, their growth is expected to slow due to the high base effect and the recent rationalization of home remittance incentives.
At the same time, the trade deficit is widening again. Imports of goods rose 12% in June 2025 to $5.422 billion compared to $4.849 billion in June 2024. Exports, meanwhile, climbed by 16% to $2.743 billion from $2.361 billion a year earlier. Despite healthy export growth, the overall goods trade deficit increased 7%, reaching $2.679 billion in the first month of FY26.
On the financing side, SBP remains optimistic that inflows will strengthen this year. The central bank expects higher private flows after Pakistan’s recent credit rating upgrade, alongside steady bilateral and multilateral support. Foreign exchange reserves already stood at $14 billion at the end of FY25 due to inflows received in June. With additional expected financing, reserves are projected to rise by $3.5 billion, reaching $17.5 billion by June 2026.
Economists argue that sustaining export growth, managing imports carefully, and ensuring steady remittances are critical for Pakistan to contain its external vulnerabilities. The balance between trade dynamics and financial inflows will determine whether the country can maintain stability in its current account throughout FY26.