Pakistan’s current account slipped into a deficit of $103 million in May 2025, reversing the modest $47 million surplus posted in April, according to data released by the State Bank of Pakistan (SBP) on Tuesday. The deterioration marks a break in the country’s recent trend of improving external balances, driven largely by changes in the trade dynamics.
On a year-on-year (YoY) basis, however, the deficit was down by 56%, compared to a shortfall of $235 million in May 2024, suggesting some underlying resilience in the country’s external sector.
“Current account posted a deficit of $103 million, reversing the surplus trend seen in previous months. This deterioration was largely due to the widening trade deficit, which rose to $3 billion—up 52% YoY and 16% from April,” said Waqas Ghani, Head of Research at JS Global.
Key Highlights from May 2025 Data:
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Exports (Goods & Services):
Fell to $3.15 billion, a 15% YoY decline from $3.71 billion in May 2024. -
Imports (Goods & Services):
Rose to $6.36 billion, an increase of 7% YoY. -
Trade Deficit:
Widened significantly to $3 billion, up from $2.58 billion in April. -
Remittances:
Provided a critical cushion, surging to $3.69 billion, up 13% YoY, largely driven by inflows from the Middle East and the United Kingdom.
Despite the monthly setback, Pakistan’s current account for the first eleven months of FY25 (11MFY25) remains in surplus, standing at $1.81 billion. This is a significant turnaround from the $1.57 billion deficit recorded in the same period of the previous fiscal year.
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Why It Matters:
The May deficit, while modest, highlights Pakistan’s vulnerability to trade shocks, especially amid volatile global commodity prices and geopolitical uncertainty. The widening trade gap reflects weak export performance and a rebound in import demand, possibly due to easing restrictions and seasonal demand.
Policymakers have leaned on tight monetary policy, import control measures, and diaspora-driven remittances to manage external pressures. While these strategies have yielded a current account surplus for most of FY25, sustained export growth remains elusive.
Outlook:
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Remittance strength remains a bright spot and may continue to support external accounts in the near term.
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Export revival, especially in textiles and services, is critical to long-term sustainability.
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The upcoming FY26 budget and its implications for import policy and investor confidence will be pivotal in determining the trajectory of the current account.
