C/A slips into $649m deficit

KARACHI:

Current Account Balance (CAB) recorded a deficit of $649 million in June 2026 compared to a surplus of $500 million in May 2026 and a surplus of $220 million in June 2025. Cumulatively, CAB recorded a deficit of $139 million during FY26 compared to a surplus of $1,838 million in FY25.

"This decrease is attributed to a 19.5% year-on-year increase in total imports and an 8% increase in total exports. This brings the current account deficit for FY26 to $139 million, compared to $1,838 million surplus during FY25," noted AHL.

The monthly figure marked a significant swing from the positive balances seen earlier in the year and erased much of the cumulative surplus that had built up through the first nine months of FY26.

The broader goods and services account remained under pressure throughout the year. The combined deficit on trade in goods and services widened to $35.514 billion in FY26 from $29.639 billion in FY25.

Goods exports declined to $30.843 billion from $32.343 billion a year earlier, reflecting softer demand in key markets and lower unit values in some categories. Goods imports, however, rose to $64.466 billion from $59.146 billion, lifting the merchandise trade deficit to $33.623 billion from $26.803 billion.

Services trade provided a partial offset. Exports of services increased to $10.04 billion from $8.45 billion, led by strong growth in telecommunications, computer and information services, which reached $4.6 billion. Imports of services edged up to $11.93 billion from $11.28 billion. As a result, the services deficit narrowed to $1.89 billion from $2.84 billion.

Total exports of goods and services remained almost unchanged at $40.877 billion, while total imports climbed to $76.391 billion from $70.432 billion.

Secondary income continued to support the external account. Workers' remittances rose 8.6% to a record $41.585 billion in FY26 from $38.300 billion in the previous year. The full-year secondary income surplus reached $43.813 billion, up from $40.315 billion.

In June alone, remittances stood at $3.475 billion, lower than the $4.252 billion recorded in May but still higher than the corresponding month of the previous year. Official transfers and other current transfers made smaller contributions.

The primary income account, which records investment income and interest payments, showed a modest improvement. The deficit narrowed to $8.438 billion from $8.838 billion, helped by a slight decline in outflows relative to the previous year.

The June deficit of $649 million stood in contrast to the surplus of $500 million in May and reflected a combination of higher import payments and a seasonal softening in remittances. Goods imports in June reached $6.147 billion, while goods exports were $2.595 billion. Services exports of $956 million and services imports of $931 million left a small surplus on the services side for the month.

Cumulatively, the current account had remained in surplus through the first three quarters before the final-quarter and June figures pulled the annual balance into a narrow deficit.

The financial account recorded a deficit of $1.21 billion in FY26, compared with a surplus of $1.58 billion in FY25. SBP's gross reserves, including cash foreign currency holdings and excluding unsettled claims on the Reserve Bank of India, stood at $19.689 billion at the end of June 2026, up from $15.836 billion a year earlier. Reserves excluding CRR and SCRR were reported at $18.500 billion.

The near-balanced current account for the full year masks a clear widening of the underlying trade gap. The rise in imports, particularly of goods, outpaced the modest recovery in services exports and the continued growth in remittances. Goods exports failed to regain the levels seen in FY25, leaving the external sector more dependent on secondary income flows.

Net Foreign Direct Investment (FDI) into Pakistan clocked in at $1.6 billion during FY26, registering a 34% year-on-year decline compared to $2.48 billion in FY25.

According to data from the State Bank of Pakistan and AKD Research, net FDI in June 2026 stood at just $14 million, reflecting a sharp 94% drop both year-on-year (from $210 million in June 2025) and month-on-month (from $214 million in May 2026).

Country-wise, China remained the largest source with $862 million in FY26 (down 28% from $1.205 billion), followed by Hong Kong at $339 million (down 28%). The UAE contributed $236 million (down 20%), while Switzerland posted growth with $205 million (up 22%). Other countries recorded a net outflow.

Sector-wise, the power sector attracted the highest inflow of $958 million (down 19% year-on-year), followed by financial business at $805 million (up 15%). Electrical machinery attracted $146 million, while the food sector and others posted net outflows.

The annual trend shows FY26 FDI well below the 10-year average, continuing a volatile pattern observed over the past decade.