KARACHI:
Pakistan’s external sector showed renewed strain in February as the country’s current account slipped back into deficit, highlighting the fragility of recent macroeconomic stability despite strong remittance inflows.
According to the latest balance of payments data released by the State Bank of Pakistan (SBP), the country posted a current account deficit of $700 million from July to February 2026, reversing the $479 million surplus recorded in the same period last year. The deterioration reflects persistent structural weaknesses in Pakistan’s trade balance, where import growth continues to outpace export performance.
For 8MFY26, the country posted a current account deficit of $700 million, compared with a surplus of $479 million during the same period last year, stated AHL.
However, in February 2026, a current account surplus of $427 million was recorded, compared with a deficit of $85 million in February 2025 and a surplus of $68 million in January 2026.
“Country posted the highest monthly current account surplus in Feb’26 since Mar’25,” according to AHL.
The data suggest that while policymakers have often highlighted improvements in the current account as evidence of economic stabilisation, the underlying external position remains vulnerable to fluctuations in imports and global economic conditions.
The trade deficit in goods widened to $2.67 billion in February, as exports fell to $2.48 billion while imports stood significantly higher at $5.15 billion. This persistent imbalance continues to be the central driver of Pakistan’s external financing needs and underscores the country’s long-standing dependence on imported energy, machinery and raw materials.
For the July-February period of FY2026, Pakistan recorded a current account deficit of $700 million, compared with a surplus of $479 million during the same period of FY2025, indicating that external pressures are gradually returning as economic activity picks up.
A deeper look at the balance of payments reveals that Pakistan’s structural trade challenges remain largely unchanged. The cumulative goods trade deficit reached $21.08 billion during July-February FY2026, widening significantly from $16.49 billion in the same period last year. The widening gap suggests that export growth has struggled to keep pace with the rebound in domestic demand and industrial imports.
Exports of goods during the eight-month period stood at $20.74 billion, compared with $21.94 billion a year earlier, reflecting a decline in export momentum despite government initiatives to boost shipments. Imports, meanwhile, increased to $41.82 billion, illustrating how Pakistan’s growth model continues to rely heavily on imported inputs and consumer goods.
The services account also remained negative, adding further pressure to the external balance. Pakistan recorded a services trade deficit of $2.14 billion during July-February FY2026, as services imports such as freight, travel and technical services exceeded export earnings from IT and other sectors.
Remittances once again played a crucial stabilising role. Workers’ remittances amounted to $26.49 billion during the JulyFebruary period, providing the single largest cushion for Pakistan’s external account. Without these inflows, the current account deficit would have been significantly larger.
However, analysts caution that reliance on remittances and external financing cannot substitute for structural reforms aimed at improving export competitiveness. Remittances from the Gulf region could also be affected by instability in the region after Israel and the United States launched an illegitimate war on Iran. Pakistan’s export base remains concentrated in low-value-added sectors such as textiles, which face intense competition from regional producers.
Another area of concern is the primary income account, where Pakistan continues to experience large outflows due to profit repatriation and external debt servicing. The primary income deficit stood at $5.64 billion during July-February FY2026, reflecting payments on foreign investments and loans.
On the financial account side, foreign direct investment (FDI) remained modest, with $1.20 billion recorded during the July-February period, indicating that Pakistan continues to struggle to attract sustained foreign capital inflows amid economic and policy uncertainty.
Portfolio investment flows also remained volatile, reflecting cautious investor sentiment toward emerging markets and Pakistan’s macroeconomic outlook.
Despite the external pressures, Pakistan’s foreign exchange reserves showed improvement over the past year. The central bank’s gross reserves rose to $17.61 billion by February 2026, compared with $12.51 billion a year earlier, largely supported by multilateral inflows, external financing and, in recent times, the SBP buying dollars from the market to consolidate its reserves.
The Pakistani rupee posted a marginal gain against the US dollar in the inter-bank market on Monday, closing at 279.30 compared with 279.31 in the previous session.
Gold prices in Pakistan fell on Monday in line with international trends. Per tola gold declined Rs1,800 to Rs522,762, while 10-gram gold dropped Rs1,543 to Rs448,184, according to the All-Pakistan Gems and Jewellers Sarafa Association. Globally, gold slipped $18 to $5,000 per ounce. Silver also fell Rs100 to Rs8,441 per tola.
