Pakistan’s current account balance (CAB) recorded a deficit of $12 million in February 2025, a significant improvement from the $399 million deficit in January 2025.
For the July-February FY25 period, the current account posted a surplus of $0.7 billion, starkly contrasting the $1.7 billion deficit recorded during the same period last year.
This turnaround has been fueled by robust remittance inflows of $3.1 billion and a slight export increase. However, underlying structural issues persist, as the trade deficit in goods and services remains high at $2.73 billion. While exports increased by 2.4% to $2.59 billion, imports surged by 15% to $5.02 billion, straining external balances and raising concerns about inflationary pressures and external financing needs.
Despite improving the current account, Pakistan’s external sector faces significant risks. Weak foreign investment inflows, rising debt repayments, and persistent trade imbalances continue challenging the economy.
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Waqas Ghani Kukaswadia, Research Head at JS Global, commented, “The current account improved compared to the previous month but remained in the red due to a high trade deficit offsetting the benefits of increased remittances in February.” He added that while the 8MFY25 current account balance shows a surplus of $691 million, the financial account, including foreign loans and investments, has declined recently.
The decline in the Balance of Payments (BoP) is putting pressure on the State Bank of Pakistan (SBP) reserves, which dropped by $634 million year-to-date (CYTD). The import cover has also fallen from 2.8 to 2.3 months, highlighting the need for sustained external financing.
The improved Current Account Balance (CAB) results from export growth and strong secondary income inflows, mainly from workers’ remittances. Nonetheless, the trade deficit in goods and services continues to be a concern, driven by increasing demand for energy and capital goods.
- Exports: Increased by 2.4% year-on-year (YoY) to $2.59 billion.
- Imports: Surged by 15% YoY to $5.02 billion, widening the trade gap.
