Pakistan’s external account exhibited a notable improvement in the first eight months of FY25 (July-February), posting a $691 million current account surplus. This shift from a $1.73 billion deficit in FY24 is primarily driven by a 32% year-on-year increase in remittances, which reached $24 billion by January 2025.
However, external pressures are mounting, as imports continue to rise, leading to monthly deficits in January ($399M) and February ($12M) after three months of surplus.
Key Trends & Factors
1️⃣ Surplus vs. Last Year’s Deficit
- $691 million surplus in Jul-Feb FY25, compared to a $1.73 billion deficit in the same period last year.
- The surplus is largely supported by strong home remittance inflows and moderate export growth.
2️⃣ 11% Growth in Imports Leading to Deficits
- Imports rose 11% to $38.325 billion (vs. $34.410 billion in FY24), pushing Pakistan into monthly deficits in January and February.
- February’s $12 million deficit is an improvement from January’s $399 million deficit, indicating some stabilization.
3️⃣ Financial Inflows & Economic Outlook
- Weak net financial inflows persist due to delays in official funding, adding pressure on the external account.
- The IMF’s Extended Fund Facility (EFF) tranche is expected to provide relief in the coming months.
- The SBP maintains an optimistic outlook, forecasting a FY25 current account balance within a surplus to a 0.5% GDP deficit range.
Conclusion: A Balancing Act for Pakistan’s External Account
Despite the positive impact of remittances, rising imports and slow financial inflows pose risks to the external account. The coming months will be critical in determining whether Pakistan can sustain a surplus or face a growing deficit, especially with global commodity price fluctuations and pending financial inflows from international institutions.
While the current account surplus signals a positive shift, sustained external stability will depend on managing import growth, securing financial inflows, and maintaining remittance momentum. The expected IMF funding and other foreign inflows will be critical in addressing financing gaps. Moving forward, Pakistan must focus on export diversification, investment inflows, and trade balance improvements to ensure long-term economic resilience.