By Staff Reporter
KARACHI: Pakistan’s current account swung to a deficit in the fiscal year through June, as a jump in imports overwhelmed record remittance inflows and left exports essentially unchanged, threatening to complicate the central bank’s path toward further interest-rate cuts.
The current account showed a shortfall of $139 million in the fiscal year ended June 30, compared with a surplus of $1.84 billion a year earlier, the State Bank of Pakistan said on Friday. The reversal came even as workers’ remittances climbed to an all-time high, underscoring how dependent the country remains on money sent home by its diaspora to keep its external accounts afloat.
The deficit undercuts a forecast by central bank Governor Jameel Ahmad, who told the Pakistan Banking Summit in June that he expected the current account to be balanced or in surplus for a second straight year. The shortfall, while narrow at roughly 0.03% of gross domestic product, points to a trade imbalance that some economists warn could deepen in the new fiscal year.
Imports of goods and services rose 8.5% to $76.39 billion in the 12 months through June, from $70.43 billion the year before, according to central bank data. Exports, meanwhile, inched up just 0.2% to $40.88 billion from $40.79 billion, leaving Pakistan’s trade gap at its widest since the 2022 fiscal year.
“The main reason behind the current account deficit is the widening trade deficit,” said Sana Tawfik, head of research at Arif Habib Ltd. Imports accelerated through the year while exports “did not provide enough support,” she said, adding that the weaker trade balance was the primary driver of the shift into deficit.
Remittances rose 8.6% to a record $41.59 billion for the fiscal year, from $38.3 billion previously, providing what has become the principal cushion for Pakistan’s external position. The inflows have increasingly become the linchpin holding the current account together as the trade shortfall widens.
Composition Draws Scrutiny
Economists cautioned that the headline figures mask a less favourable shift beneath the surface. Saad Hanif of Ismail Iqbal Securities said the current account balance itself is “not an immediate cause for concern,” but flagged the mix of accelerating imports and stagnant exports as troubling.
“A recovery in imports alongside contracting exports is the least favourable combination for the external account, as it suggests domestic demand is rebounding faster than the economy’s ability to generate foreign exchange,” Hanif said.
Waqas Ghani, head of research at JS Global, offered a similar assessment. “On the surface, the current account position looks remarkably composed, but the composition of that composure is what demands scrutiny,” he said.
June Deficit Widens Sharply
The deterioration was most pronounced in June, when Pakistan posted a current account deficit of $649 million — the largest monthly shortfall of the fiscal year — compared with a surplus of $500 million in May and a surplus of $220 million in the same month a year earlier.
Topline Securities attributed the June slide to a combination of higher imports and a pullback in remittances, which together tipped the full-year balance into deficit. Imports climbed to $7.08 billion in June from $6.42 billion in May and $5.92 billion a year earlier. Exports rose to $3.55 billion from $3.2 billion in May, though they were little changed from $3.3 billion in June 2025.
Remittances eased to $3.48 billion in June from a record $4.25 billion in May, but remained roughly in line with the $3.4 billion recorded in June 2025.
Hanif warned that if June’s pace of deterioration persists into the new fiscal year, the annual current account deficit could widen materially, a scenario that would pressure the rupee and constrain the central bank’s ability to continue cutting interest rates from the current benchmark of 11.5%.
“The near-balanced headline figure should therefore not be interpreted as evidence of durable external stability,” Hanif said. “Rather, it reflects stability underpinned by remittances, with a sustained recovery in exports remaining critical in the new fiscal year.”
Even as the current account weakened, the State Bank’s foreign-exchange reserves grew to $18.5 billion by the end of the fiscal year, up from about $14.64 billion a year earlier, giving policymakers a larger cushion against external shocks as they navigate the widening trade imbalance.
- Pakistan’s Current Account Slips Into Deficit as Imports Outrun Exports
- Record Remittances Can’t Save Pakistan From Current-Account Deficit
- Pakistan Posts Surprise Current-Account Gap on Import Surge
- Trade Gap Pushes Pakistan’s Current Account Into the Red
- Pakistan’s External Buffer Cracks as Import Bill Balloons
Suggested deck/subheadline options:
- “Widest Trade Deficit Since 2022 Overshadows Remittance Record”
- “Economists Warn Composition of Balance, Not Headline Number, Is the Risk”
- “June Slump Raises Concerns Over Path for Further Rate Cuts”
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