Moaaz Manzoor

Pakistan’s current account remained in surplus during the first eight months of FY25 despite a widening trade deficit, thanks to a steady inflow of remittances that provided crucial support, reports WealthPK. Latest data from the State Bank of Pakistan (SBP) shows that the current account recorded a modest deficit of $12 million in February 2025 — a sharp recovery from $399 million in January.

Despite the monthly decline, the cumulative balance for 8MFY25 stands at a surplus of $691 million — a significant turnaround from the $1.73 billion deficit recorded in the same period last year. This improvement has been driven by a surge in remittance inflows, which reached $3.12 billion in February, marking a 38.6% year-on-year increase. However, the trade balance remains under pressure, with exports rising by 3% year-on-year to $3.3 billion, while imports surging by 17.6% to $6.03 billion in the same period.

Experts highlighted that the rising trade deficit could challenge the external account stability in the coming months without sustained foreign inflows. Speaking with WealthPK, Majid Shabbir, CEO of Ifsha Consultant, noted, "Pakistan’s current account performance has improved primarily due to the higher remittances and steady service exports, which continue to play a crucial role in stabilizing its foreign exchange reserves. While exports have seen a moderate growth, import pressures persist, making remittance inflows even more critical."

"Strong inflows from overseas Pakistanis have partly offset the decline in both exports and imports over the previous months,” he added. Syed Ali Ehsan, Deputy Executive Director at the Policy Research Institute of Market Economy (PRIME), emphasized, "Remittance inflows in February reached historic highs due to multiple factors, including improved formal banking channels, seasonal trends, and policy measures encouraging legal remittance transfers."

He explained that policy interventions by the government and SBP — such as incentives for formal remittances and crackdowns on illegal money transfers — have significantly contributed to this surge." The government seems to remain cautiously optimistic about the external accounts trajectory. While the rising trade deficit presents risks, strong remittance inflows continue to act as a stabilizing factor, providing the much-needed foreign exchange liquidity.

Credit: INP-WealthPk