Current account posts $254 million deficit in July

Pakistan's current account (CA) posted a deficit of $254 million in July 2025, according to the latest figures released by the State Bank of Pakistan (SBP) on Tuesday.

Last month, the country recorded a CA surplus of $335 million, while in July 2024, the deficit had stood at $348 million.

The SBP data shows a CA deficit of $254 million in July 2025, reflecting a notable improvement compared to the $348 million deficit recorded in July 2024. This marks a year-on-year reduction of $94 million, indicating a positive shift in the country's external sector dynamics as the new fiscal year begins. However, the monthly CA data from July 2024 to July 2025 highlights a period of mixed performance, with several months showing strong surpluses that helped offset periods of modest deficits.

The fiscal year began with three consecutive months of deficits; July ($0.35 billion), August ($0.08 billion), and September 2024 ($0.04 billion). However, this was followed by a shift in October 2024, which recorded a surplus of $310 million. The external position continued to improve in November and December 2024, with surpluses of $720 million and $470 million, respectively.

In early 2025, the trend briefly reversed. January 2025 posted the highest monthly deficit of the year at $380 million, followed by a smaller deficit of $80 million in February. March 2025 marked a strong recovery, as Pakistan recorded its highest monthly surplus during the period at $1.28 billion, reflecting either a surge in exports, remittances, or possibly one-off inflows.

The CA remained relatively stable in the closing months of the fiscal year, with April 2025 posting a marginal surplus of $20 million, May returning to a small deficit of $80 million, and June rebounding with a surplus of $340 million.

Speaking to The Express Tribune, JS Global Head of Research Waqas Ghani said, "The shortfall of $254 million in July 2025 as opposed to a surplus of $335 million last month was driven primarily by a widening trade deficit, as a strengthening domestic economy spurred a rebound in imports."

He expected the CA to end the fiscal year in deficit, driven by the pickup in imports. Even so, stable global commodity prices should help limit import pressures, while resilient workers' remittances are likely to anchor external stability.

He anticipated a further buildup in foreign exchange reserves going forward, with workers' remittances expected to exceed $40 billion in FY26. Ghani believed that the sustained inflow of remittances are driven by a shift towards official channels which are a key support to the CA. He projected the external financing requirements for FY26 to remain broadly in line with last year's levels.

REER

The Real Effective Exchange Rate (REER) index appreciated to 98.6 in July 2025, up from 96.6 in June 2025, according to data released by the SBP. This two-point increase reflects a slight strengthening of the rupee in real terms against a basket of trading partner currencies.

While the REER remains below the benchmark level of 100, the recent appreciation suggests a marginal rise in the relative value of the Pakistani rupee, which could impact export competitiveness if the trend continues. Nonetheless, the REER is still broadly aligned with historical averages, indicating relative external stability.

Meanwhile, the local currency extended its winning streak on Tuesday, August 19, 2025, appreciating 0.02% against the US dollar in the interbank market. The local currency closed at 281.96, strengthening slightly from the previous day's rate of 282.02.

This marks the eighth consecutive session of gains for the rupee, reflecting continued stability in the foreign exchange market and improved sentiment around the economy.