By Moaaz Manzoor

Pakistan recorded a current account surplus of $459 million in May 2026, reversing a deficit of $276 million in April and highlighting the growing role of remittance inflows in supporting the country's external account, according to State Bank of Pakistan (SBP) data.

The improvement came despite a widening trade deficit, as a sharp increase in workers' remittances more than offset pressures arising from imports and income payments.

Data released by the SBP showed workers' remittances reached $4.25 billion in May, the highest level in the past six months and up from $3.54 billion in April. Total secondary income inflows increased to $4.42 billion during the month from $3.75 billion a month earlier, providing a significant boost to the external sector.

The latest figures indicate that Pakistan's current account has remained in surplus for four of the first five months of 2026. After posting surpluses of $68 million in January, $231 million in February and $1.13 billion in March, the current account slipped into a deficit in April before returning to surplus in May.

The country's merchandise trade position, however, remained under pressure. Exports of goods stood at $2.37 billion in May compared with $2.62 billion in April, while imports amounted to $5.69 billion. As a result, the trade deficit in goods widened to $3.32 billion from $3.37 billion in April, remaining the largest drag on the external account.

Services trade continued to provide limited support. Exports of services were recorded at $837 million during May, while imports stood at $809 million, resulting in a modest surplus of $28 million. Although lower than the $59 million surplus recorded in March, the positive balance helped partially offset the merchandise trade gap.

Primary income outflows, which include profit repatriation and investment income payments, also remained significant. The primary income deficit stood at $634 million in May, compared with $657 million in April, reflecting continued external payment obligations.

Despite these pressures, strong remittance inflows lifted the balance on secondary income to $4.38 billion, up from $3.72 billion in April. This enabled the balance on goods, services and primary income to improve substantially and ultimately helped push the current account back into surplus territory.

The financial account also showed improvement during the month. It recorded a net inflow of $516 million in May, compared with $365 million in April. Within the financial account, direct investment in Pakistan increased to $214 million from $54 million a month earlier, indicating a recovery in foreign investor interest.

Other investment flows also strengthened considerably, generating a net inflow of $947 million compared with a marginal outflow of $31 million in April. Government-sector disbursements reached $466 million during the month, while inflows related to IMF credit and loans amounted to $211 million.

The improvement in external flows contributed to a strengthening reserve position. According to SBP data, reserve assets increased by $1.21 billion in May, compared with a $551 million decline in April. Consequently, the central bank's gross foreign exchange reserves rose to $18.47 billion by the end of May from $17.20 billion a month earlier.

The latest data suggest that remittances remain the most important stabilising factor for Pakistan's external account. While exports and foreign investment showed mixed performance and imports remained elevated, strong inflows from overseas Pakistanis helped offset external imbalances and supported reserve accumulation. Hence, posting that the sustainability of the current account position will depend on the country's ability to strengthen exports, attract higher levels of foreign investment and maintain robust remittance inflows amid evolving global economic conditions.

Credit: INP-WealthPk