Key Takeaways
- The current account deficit widened to USD139 million in FY26 from a surplus of USD1.8 billion the previous year.
- Remittances, accounting for 55% of total remittances, saw a 18% month-on-month decline in June.
- Imports surged to USD69.7 billion, with petroleum imports increasing by 5%, while food imports reached an all-time high.
Pakistan’s current account deficit widened significantly during the fiscal year 2026 (FY26), posting a marginal deficit of USD139 million compared to a surplus of USD1.8 billion in FY25, according to official data from the Pakistan Economic Survey.
The June figures were particularly concerning, with a deficit of USD649 million, up from a surplus of USD500 million in May. The primary reason for this shift was a 18% month-on-month decline in remittances, which dropped by 9% year-on-year (YoY) despite starting from a high base.
Despite the challenges, remittances still recorded decent growth YoY, more than offsetting the impact of the worsening goods trade deficit. However, going forward, keeping the current account deficit in check will be a significant challenge due to ongoing tensions with Iran and potential risks to remittances from Gulf Cooperation Council (GCC) countries.
Imports for FY26 stood at USD69.7 billion, the highest annual figure since 2022, excluding the commodity supercycle boom year. This was driven by a 5% increase in petroleum imports to USD16.8 billion, which is still 28% below the peak of USD23.4 billion recorded in FY22. However, non-petroleum imports increased by 7%, reaching USD52.9 billion, with food imports at an all-time high.
Food imports saw significant growth across the board, despite no major one-time import. The trade deficit for food reached an unprecedented level of USD4.1 billion, surpassing the previous year’s deficit of USD3.6 billion. This is a matter of concern given that food exports have declined by 30% YoY to USD5.0 billion.
The transport sector was particularly noteworthy, with import bills reaching USD4.1 billion, marking a 66% increase YoY. CKD car imports surged by 92% to USD2.1 billion and were even higher than in FY22, despite the sale of more cars that year. The SBP (State Bank of Pakistan) kept financing limits low and imposed high taxes on vehicles, which did not deter the surge in imports.
Petroleum imports increased by 72% quarter-on-quarter (QoQ) and 40% YoY to USD5.6 billion in Q4FY26, the highest level since Q4FY22. If oil prices remain high, FY27 could be a challenging year for Pakistan’s economy.
The performance of goods exports was lackluster, declining by 6% to USD30.1 billion in FY26. The worst-performing category was food exports, which fell by 30% YoY to USD5.0 billion due to border closures and poor agricultural policies. Textile exports stagnated at USD17.9 billion, while other manufacturing exports declined by 4%. This led to a goods trade deficit that worsened by 25% to USD33.6 billion.
Services exports provided some relief, but the overall economic growth remained shy of 4%, despite high imports and oil prices averaging USD79 per barrel.
