Pakistan’s current account swung back into deficit in May 2025, registering a $103 million shortfall after posting a revised $47 million surplus in April, according to fresh data released by the State Bank of Pakistan (SBP) on Tuesday. The reversal underscores the vulnerability of the country’s external sector to trade imbalances, despite months of relatively positive trends.
Year-on-Year Improvement, But Pressure Builds
On a year-on-year (YoY) basis, the deficit in May 2025 was 56% lower compared to $235 million recorded in the same month last year. However, the deterioration from April’s surplus reflects the pressure from a widening trade deficit, which rose to $3 billion, marking a 52% YoY increase and a 16% month-on-month (MoM) rise.
“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,” said Waqas Ghani, Head of Research at JS Global.
FY25 Still in Surplus
Despite the monthly setback, Pakistan’s external position has significantly improved over the course of the current fiscal year. For the first 11 months of FY25 (11MFY25), the country has posted a cumulative current account surplus of $1.81 billion, a sharp turnaround from a deficit of $1.57 billion during the same period of FY24.
This improvement has been driven by a combination of policy-driven import restrictions, high interest rates, and lower growth that helped dampen external demand.
Detailed Breakdown: Trade and Remittances
Here’s a snapshot of the key components in May 2025:
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Exports of Goods and Services:
Fell to $3.15 billion, down 15% compared to $3.71 billion in May 2024. -
Imports of Goods and Services:
Increased to $6.36 billion, a 7% YoY rise, indicating a sharp rebound in demand or pricing of imported commodities, including energy and machinery. -
Workers’ Remittances:
Rose to $3.69 billion, up over 13% from the same period last year, offering critical support to the current account and partially offsetting the trade gap.
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What’s Driving the Current Account Volatility?
While the double-digit growth in remittances is encouraging, the recent swing into deficit can be largely attributed to:
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Surging imports, especially after easing some restrictions
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Global commodity price volatility
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Sluggish export growth amidst soft external demand and persistent structural bottlenecks
Moreover, Pakistan’s high interest rates, although recently cut, have played a dual role—dampening demand to control inflation but also curbing industrial output and exports.
Policy Outlook and Implications
The return to a current account deficit in May may raise questions for policymakers, especially as Pakistan prepares for a new IMF program and faces debt repayments in the second half of 2025.
While the overall $1.81 billion surplus for FY25 so far remains a positive development, sustaining this will require:
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Reviving exports through structural reforms
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Monitoring import growth as the economy gradually recovers
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Maintaining stable remittance inflows amid geopolitical uncertainty in key Gulf economies
If managed carefully, Pakistan could retain external sector stability going into FY26—especially critical amid high debt service obligations and ongoing energy price volatility.
