Despite record workers’ remittances, Pakistan’s external account was pushed into negative due to high imports, while exports remained largely stagnant during the outgoing fiscal year.

Earlier, SBP Governor Jameel Ahmad projected the current account would remain balanced or in surplus for the second consecutive fiscal year, i.e. FY26, paving the way for an increase in economic activities and growth in the ongoing fiscal year.

“I am quite confident that June numbers will also be good. So, overall, we are expecting the current account balanced or slightly in surplus for FY26,” the central bank chief said while speaking at the Pakistan Banking Summit 2026.

The deterioration in the C/A was largely driven by a widening trade gap.

During FY26, Pakistan’s exports of goods and services clocked in at $40.88 billion, compared with $40.79 billion in FY25, reflecting a rise of just 0.2%.

Meanwhile, imports of goods and services climbed to $76.39 billion during the fiscal year from $70.43 billion a year earlier, an increase of nearly 8.5%.

Workers’ remittances reached a record $41.59 billion in FY26, up 8.6% from $38.3 billion received in the previous fiscal year, providing crucial support to the country’s external position despite a wider trade gap.

“The main reason behind the current account deficit is the widening trade deficit, which was the highest since FY22,” Sana Tawfik, Head of Research at Arif Habib Limited, told Business Recorder.

She noted that imports picked up significantly during the fiscal year, while exports showed little to no growth and did not provide enough support. “Consequently, the weaker trade balance pushed the current account into deficit.”

Meanwhile, Saad Hanif of Ismail Iqbal Securities was of the view that the headline current account figure is broadly balanced and, at around 0.03% of GDP, “is not an immediate cause for concern”.

“However, the composition is less reassuring. A recovery in imports alongside contracting exports is the least favourable combination for the external account, as it suggests domestic demand is rebounding faster than the economy’s ability to generate foreign exchange,” he said.

Similar sentiments were expressed by Waqas Ghani, Head of Research at JS Global.

“On the surface, the current account position looks remarkably composed, but the composition of that composure is what demands scrutiny,” he said.

Massive deficit in June

On a monthly basis, Pakistan posted a current account deficit of $649 million in June 2026, compared with a surplus of $500 million in May 2026. In June 2025, the country had recorded a current account surplus of $220 million.

“The monthly deficit was primarily attributable to higher imports coupled with lower workers’ remittances in Jun 2026, resulting in the cumulative FY26 current account balance shifting into a modest deficit,” said Topline Securities.

Saad Hanif also noted that June’s current account deficit was the widest of the fiscal year, and if that pace continues into FY27, the annual deficit could widen significantly.

“That would warrant caution on the rupee and limit the SBP’s scope for further monetary easing from the current policy rate of 11.5%.

“The near-balanced headline figure should therefore not be interpreted as evidence of durable external stability; rather, it reflects stability underpinned by remittances, with a sustained recovery in exports remaining critical in the new fiscal year.”

During June 2026, exports of goods and services stood at $3.55 billion, compared with $3.2 billion in May 2026 and $3.3 billion in June 2025.

Imports of goods and services amounted to $7.08 billion in June 2026, compared with $6.42 billion in May 2026, while they were $5.92 billion in the corresponding month of last year.

Workers’ remittances clocked in at $3.48 billion during June 2026, easing from the record $4.25 billion received in May 2026 but remaining broadly in line with the $3.4 billion received in June 2025.

The SBP’s reserves stood at $18.5 billion at the end of FY26, compared with around $14.64 billion a year earlier, providing stronger external buffers amid improving macroeconomic stability.

Pakistan’s REER Index

Pakistan’s Real Effective Exchange Rate (REER) has increased to a seven-year high of 106.44 in June 2026 compared to 106.08 in May 2026.

“This reading remains at a 7-year high and is also above the 10-year average of 102.52,” said Topline Securities.

A REER above 100 means the country’s exports are uncompetitive, while imports are cheaper. The situation reverses when REER stands below 100 on the index.

Meanwhile, the Nominal Effective Exchange Rate Index (NEER) increased by 0.64% MoM in June 2026 to a provisional value of 38.14 from 37.9 in May 2026.

What is REER?

As per the central bank, REER is an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners.

“The prices of these baskets are expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner’s basket is weighted by its share in imports, exports, or total foreign trade,” the SBP website says.

Car sales surged by 39% to 155,631 units, sales of jeeps and pickups increased by 41% to 50,814 units, sales of trucks and buses rose by 67% to 7,439 units and sales of rickshaws rose by 25% to 985 units, respectively, according to the Pakistan Automotive Manufacturers Association (PAMA) data released on Monday.

Motorbikes and rickshaws went up by 30% to 1,972,077 units.

Meanwhile, sales of farm tractors slid by 1% to 28,791 units as growers are not willing to invest in the agriculture sector because of poor returns for a couple of years.

Speaking to Business Recorder, auto and bike analyst and expert Muhammad Sabir Shaikh said multiple reasons led to an increase in car sales in FY26, including increasing purchasing power of car lovers-cum-users, useful car financing schemes of banks suiting car buyers and more car assemblers coming with a vast variety of car variants and car types including fuel-driven, electric and hybrid.

“Bike sales have yet to recover. Before the Covid-19 pandemic, annual motorcycle sales, both official and unofficial, had surged to around 3 million units in 2016. Unfortunately, the purchasing power of middle-class consumers, who make up the bulk of motorcycle buyers, has declined significantly. As a result, many cannot afford an electric bike priced at around Rs300,000. In contrast, buyers in the car segment continue to purchase vehicles worth more than Rs10 million, reflecting a sharp increase in their purchasing power.”

He said Pakistan’s public transport system remains inadequate, particularly in Sindh, where even Karachi suffers from deteriorating road infrastructure. He urged both the federal and provincial governments to immediately invest in improving road infrastructure and expanding the public transport network.

“It has become extremely difficult for a middle-class family to afford a motorcycle today, even though it has become a necessity. With fuel prices remaining high, fares for auto-rickshaws and ride-hailing services have risen sharply, making motorcycle ownership increasingly essential,” Shaikh maintained.

Overseas workers’ remittances to Pakistan increased by 9% to $41.6 billion during Jul-June FY26, up from $38.3 billion in the previous fiscal year.

During June, remittances stood at $3.475 billion, according to data from the State Bank of Pakistan (SBP) released on Thursday.

In terms of growth, remittances declined by 18% on a month-on-month basis but were up 2% on a year-on-year basis.

Analysts attributed the annual increase to a combination of structural and policy factors.

Saad Hanif, Head of Research at Ismail Iqbal Securities, said the growth was driven by the continued shift from informal to formal banking channels following exchange company reforms and the crackdown on hawala/hundi, a stable rupee near Rs278 per US dollar that removed the incentive to delay or divert transfers, and a larger remitter base resulting from elevated GCC-bound emigration over the past two years.

“The corridor data reflects this breadth, with UAE up 12%, EU up 15% and others up 20% year-on-year, while incentive schemes provided additional support through the year,” he told Business Recorder

Waqas Ghani, Head of Research at JS Global Capital, said structural support from higher overseas employment, continued migration toward formal banking channels, and stable exchange rate dynamics continued to underpin inflows throughout the year.

Meanwhile, Sana Tawfik, Head of Research at Arif Habib Limited, said exchange rate stability, a narrow gap between interbank and open market rates, and administrative measures against illegal money transfer channels encouraged remittances through formal banking channels. She added that the increasing number of Pakistani workers going abroad had also contributed to higher inflows.

Remittances play a significant role in supporting the country’s external account, stimulating economic activity, and supplementing the disposable incomes of remittance-dependent households.

“The record inflows remain the anchor of Pakistan’s external account, fully absorbing a trade deficit that widened 21.6% year-on-year to $39.5 billion and keeping the current account in surplus,” Hanif said.

“This allowed SBP reserves to rise to $18.4 billion from $13 billion a year earlier, despite heavy debt repayments, supporting rupee stability and building room for eventual monetary easing.”

Ghani echoed the view, saying remittances remain the cornerstone of Pakistan’s external account as trade pressures increase.

Hanif said SBP projects workers’ remittances at $44 billion in FY27, with key monitorables being the Gulf conflict’s impact on GCC labour markets and the withdrawal of remittance incentive schemes.

“This historic milestone reflects the unwavering confidence of overseas Pakistanis and reinforces Pakistan’s external sector resilience, stronger foreign exchange buffers, and improving macroeconomic fundamentals,” said Adviser to the Finance Minister Khurram Schehzad on X.

“FY26 is a record achievement with the last 3 years’ growth being phenomenal, powered by millions of hardworking Pakistanis across the globe,” he added.

Earlier, SBP Governor Jameel Ahmad said the preliminary numbers suggested that the inflows of workers’ remittances would end up above $41.5 billion in FY26, higher than last year, despite the recent geopolitical crisis in the region.

Last week, SBP discontinued a government-backed incentive scheme that reimbursed banks for telegraphic transfer charges on workers’ remittances.

Similarly, SBP also decided to discontinue the Sohni Dharti Remittance Program (SDRP), ending the incentive scheme that rewarded overseas Pakistanis for sending remittances through formal banking channels.

Breakdown of remittances

Overseas Pakistanis in Saudi Arabia remitted the largest amount in June 2026, sending $830 million. The amount was up 1% compared to the $823 million sent by the expatriates in the same month last year. However, the amount was down by 19% compared to $1,025 million recorded in May 2026.

Inflows from the United Arab Emirates rose by 10% on a yearly basis, from $717 million in June 2025 to $792 million in June 2026. They decreased significantly by 21% on a monthly basis.

Remittances from the UK amounted to $515 million during June 2026, down by 20% compared to $645 million in May.

Overseas Pakistanis in the US sent $297 million in June, a monthly decrease of 15% from $349 million during May.

Meanwhile, remittances from European Union (EU) countries clocked in at $415 million in June, recording a decrease of 11% on a monthly basis from $466 million in May.

Pakistan’s headline inflation clocked in at 11.1% on a year-on-year (YoY) basis in June 2026, as shown by Pakistan Bureau of Statistics (PBS) data on Wednesday.

The consumer price index (CPI) was recorded at 11.7% in May 2026. The CPI stood at 3.2% in June 2025.

On a month-on-month basis, it decreased by 0.3% in June 2026 as compared to an increase of 0.5% in the previous month and an increase of 0.2% in June 2025.

During the last fiscal year 2025-26, inflation stood at 7.05% against 4.49% recorded in the same period last year.

“The YoY uptick in inflation has largely been driven by increases in energy and transportation costs due to rising oil prices amid ongoing geopolitical tensions,” said Arif Habib Limited (AHL), in a note.

Urban CPI inflation increased by 11.2% on a year-on-year basis in June 2026, as compared to an increase of 11.8% in the previous month and an increase of 3.0% in June 2025.

On a month-on-month basis, it decreased by 0.5% in June 2026 as compared to an increase of 0.7% in the previous month and an increase of 0.1% in June 2025.

Rural CPI inflation increased by 10.9% on a year-on-year basis in June 2026 as compared to an increase of 11.5% in the previous month and an increase of 3.6% observed in June 2025.

On a month-on-month basis, no changes were observed in June 2026 as compared to an increase of 0.3% in the previous month and an increase of 0.5% in June 2025.

Government expectations

In its latest monthly outlook, the Ministry of Finance noted that the recent easing of geopolitical tensions, due to the ongoing peace efforts in the Middle East, has improved global market sentiment.

Consequently, international crude oil prices have eased from their recent highs, which is expected to reduce imported inflationary pressures and help lower domestic fuel and transportation costs.

“Inflation is anticipated to remain within the range of 11-12% for June 2026,” it said, adding that lower international oil prices are also expected to support the external account by containing the oil import bill.

Last month, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) decided to keep the policy rate unchanged at 11.5%. It is assessed that inflation in June will remain in double digits for the next few months, before gradually easing subsequently.

Remittance inflow since Jan 2024

The inflow of overseas workers’ remittances into Pakistan stood at $4.251 billion in May 2026, the State Bank of Pakistan (SBP) data showed on Wednesday.

In terms of growth, remittances increased by 20.2% on a month-on-month basis and 15.4% on a year-on-year basis.

Cumulatively, workers’ remittances increased by 9.2% to $38.1 billion during Jul-May FY26, compared to $34.9 billion received during the same period last year.

“The strong growth was primarily driven by Eid-related seasonal inflows, as remittances typically increase during festive periods,” said Topline Securities in a note.

“We expect remittances in FY26E to clock in slightly above our target of $41 billion,” it added.

The 11MFY26 average remittance run-rate has now risen to $3.5 billion per month in FY26, compared to $3.2 billion in the prior year, said Waqas Ghani, Head of Research at JS Global, told Business Recorder, representing a 9% YoY improvement.

“This improvement continues to reflect structural factors like higher emigration volumes, sustained shift from hawala to formal banking channels, and relatively stable FX spreads in the interbank market.

“Regional geopolitical developments appear to have further accelerated remittance flows,” he added.

Pakistan had recorded its “highest-ever monthly remittance inflow in history”, said Adviser to the Finance Minister Khurram Schehzad on X.

“This is a resounding testament to the unwavering confidence of overseas Pakistanis, which is further strengthening the country’s economy and external stability.

“With the last month of the fiscal year, remittances are all set to surpass $41 billion for the first time in history!” he added.

Remittances play a significant role in supporting the country’s external account, stimulating Pakistan’s economic activity, and supplementing the disposable incomes of remittance-dependent households.

Meanwhile, the government promotes remittances through incentives and formal channels to sustain steady growth and ensure their role in economic stability.

Breakdown of remittances

Overseas Pakistanis in Saudi Arabia remitted the largest amount in May 2026, sending $1,025 million. The amount was up 12% compared to the $914 million sent by the expatriates in the same month last year. Moreover, the amount was up by 22% compared to $842 million in April 2026.

Inflows from the United Arab Emirates rose by 33% on a yearly basis, from $754 million in May 2025 to $1,007 million in May 2026. They increased significantly by 37% on a monthly basis.

Remittances from the UK amounted to $645 million during May 2026, up by 15% compared to $564 million in April.

Overseas Pakistanis in the US sent $350 million in May, a monthly increase of 10% from $317 million during April.

Meanwhile, remittances from European Union (EU) countries clocked in at $466 million in May, recording an increase of 8% on a monthly basis from $432 million in April.

Sales of jeeps and pickups surged by 39% to 39,002 units. Sales of trucks and buses increased by 81% to 5,890 units and by 28% to 797 units, respectively. Motorbikes and rickshaws rose by 32% to 1,619,841 units.

When it comes to sales of farm tractors, their sales slid by 7% to 23,116 units as both small growers and progressive growers are distraught on account of less crop output following a climate change and shortage of water and building housing schemes on agricultural lands.

Also read: Pakistan car sales jump 45% in July-March FY26

On a monthly basis, car sales in Pakistan jumped by 117% to 17,387 units in April 2025, against 8,004 units recorded in the same month the previous year.

Auto sector expert Muhammad Sabir Shaikh said inflation and price-hike in petrol did not impact on car users-cum-buyers.

“Generally, car users call for changing their vehicles after three to four years as their vehicles start acting up and maintenance of vehicles are way more costly than fuel costs,” he said.

Shaikh said motorcycle sales also recorded significant growth due to the lack of affordable public transport in the country. He was of the view that middle-class families increasingly rely on motorcycles as a cost-effective means of commuting and ensuring timely travel while cutting daily transportation expenses.

Also read: Car sales in Pakistan jump 43% in fiscal year 2024-25

Speaking about a fall in the tractor sales, he said for five to six years, farmers remained disturbed and they were unable to get proper prices of their respective crops.

“Therefore, they are not able to buy new tractors after cultivating crops as they did practice in the past,” Shaikh said.

The country’s trade deficit stood at $4.07 billion in April, up nearly 4% against $3.92 billion recorded in the same period the previous year.

Pakistan’s exports clocked in at $2.48 billion in April 2026, registering an increase of 14% as compared to $2.17 billion in April 2025.

Pakistan’s trade deficit rises 23% to $28bn in July-March

On the other hand, imports stood at $6.55 billion in April 2026, up 7.5% against $6.1 billion recorded in the same period the previous year.

On a monthly basis, Pakistan’s trade deficit jumped 43.5% against $2.84 billion recorded in March 2026. The significant increase came on the back of an over 28% increase in imports on a monthly basis, while exports grew by just 9.5%.

Meanwhile, Pakistan’s trade deficit significantly increased by 20.3% to $31.98 billion in the first ten months of the current fiscal year (10MFY26), as compared to a deficit of $26.59 billion in July-April of the previous fiscal year (10MFY25).

The trade deficit expanded year-on-year (YoY) in the said period, driven by higher imports and a decrease in exports.

Exports in 10MFY26 stood at $25.21 billion, down over 6% against $26.89 billion recorded in the same period of FY25.

Imports were recorded at $57.19 billion, up 7% against $53.48 billion in the same period last year.

According to data released by the Pakistan Automotive Manufacturers Association (PAMA), there was a substantial rise in the sales of all two-three-and-four wheelers, while the sales of farm tractors continued to decrease as usual for several months.

Car sales in Pakistan (excluding LCVs, Vans, and Jeeps) increased by 45% to 109,655 units in July-March FY26, as compared to the 75,397 units sold in the same period the previous year.

Sales of jeeps and pickups rose by 35% to 34,374 units. Sales of trucks and buses went up by 82% to 5,143 units and by 33% to 720 units, respectively. Motorcycles and rickshaws also increased by 31% to 1,429,501 units.

Moreover, sales of farm tractors fell by 13% to 20,292 units because of climate change following losses of crop output.

Shafiq Ahmed Shaikh, an automobile expert, said, “In my opinion, despite the emergence of EVs, ICE vehicles continue to dominate production and sales in Pakistan. The ICE industry has seen a massive rebound, with passenger car sales jumping by 45% and production rising by 51%. This surge is largely attributed to a more stable macroeconomic environment by this government and a significant decrease in interest rates, which has revived bank financing and corporate auto leasing”.

Also read: Localisation key to making cars affordable for Pakistan’s middle class: experts

He said the recovery was led by the trucks and buses segment, which saw production and sales spikes of 88% and 82%, respectively, reflecting increased logistics demand and economic activity. Jeep sales surged by 35%, driven by a growing preference for SUVs and functional pickups.

Shaikh further said a steady 31% increase in the two and three wheeler category indicated that the mass market relied heavily on traditional personal mobility.

“Whereas farm tractors are the only segment to decline (-13%), primarily due to declining of farm economics and lower crop prices due to current war between three countries, as exports are almost not happening,” he said.

Regarding stability and increase in demand, Shaikh was of the view the trends reflects that ICE vehicles remain the preferred choice, as EVs are typically more expensive.

“Furthermore, ICE vehicles offer ‘refuel and go’ convenience, whereas Pakistan’s charging network is very less in numbers, remains in its infancy, and is concentrated only in major cities.

“Resale value is another critical factor. In Pakistan, a car is considered a liquid financial asset with an established secondary market. In contrast, EV resale values remain uncertain, with early data from 2025–2026 suggesting some models lose 15–25% of their value within 18 months due to buyer skepticism regarding battery degradation and range anxiety.”

Moreover, Shaikh continued, serviceability also plays a major role. “While any roadside and local mechanic can fix an ICE engine, EVs require specialised workshops, trained mechanics and imported parts their parts prices are currently scarce and expensive.”

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 7.3% on a year-on-year (YoY) basis in March 2026, as shown by Pakistan Bureau of Statistics (PBS) data on Wednesday, a reading lower than the Ministry of Finance’s estimate of 7.5-8.5%.

The consumer price index (CPI) was recorded at 7% in February 2026. The CPI stood at 0.7% in March 2025.

On month-on-month basis, it increased by 1.2% in March 2026 as compared to an increase of 0.3% in the previous month and an increase of 0.9% in March 2025.

During nine months of the fiscal year, inflation stood at 5.67% against 5.25% recorded in the same period last year.

CPI inflation urban, increased by 7.4% on a year-on-year basis in March 2026 as compared to an increase of 6.8% in the previous month and an increase of 1.2% in March 2025.

On a month-on-month basis, it increased by 1.3% in March 2026 as compared to an increase of 0.3% in the previous month and an increase of 0.8% in March 2025.

Meanwhile, CPI inflation rural, increased by 7.2% on a year-on-year basis in March 2026, as compared to an increase of 7.3% in the previous month and no change observed in March 2025.

On a month-on-month basis, it increased by 1.0% in March 2026 as compared to an increase of 0.3% in the previous month and an increase of 1.1% in March 2025.

In its Monthly Economic Update & Outlook, March 2026, the Finance Division had anticipated inflation to remain within the range of 7.5-8.5% for March 2026.

“On the external front, high inflows of remittance are expected, particularly an increase in transfers associated with the Eid festival, although their trajectory will depend on economic conditions in the host countries,” it added.

Earlier, Arif Habib Limited, a brokerage house, expected inflation to settle at 7.6% YoY, compared to 0.7% YoY in March, 2025. “The higher YoY reading is largely attributable to a low base effect, as last year’s March printed a subdued number,” it added.

Similarly, JS Global, another brokerage house, anticipated inflation to clock in at 7.3%.

A REER above 100 means the country’s exports are uncompetitive, while imports are cheaper. The situation reverses when REER stands below 100 on the index.

As per SBP’s latest data, the REER decreased 0.74% month-on-month (MoM) in February 2026.

Also read: Pakistan’s REER index clocks in at 102.27 in February 2025

When compared with February 2025, the REER value increased 0.3%, when it stood at 102.25 (revised).

The SBP says a REER index of 100 should not be misinterpreted as denoting the equilibrium value of the currency.

“Movement of the REER away from 100 simply reflects changes relative to its average value in 2010 and is unrelated to its equilibrium value,” the central bank said in an explanatory note on the topic.

Meanwhile, the Nominal Effective Exchange Rate Index (NEER) decreased by 0.50% MoM in February 2026 to a provisional value of 37.64 from 37.83 in January 2026.

On a yearly basis, the NEER index decreased by 3.7% from the value of 39.09 in February 2025.

What is REER?

As per the central bank, REER is an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners.

“The prices of these baskets are expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner’s basket is weighted by its share in imports, exports, or total foreign trade,” the SBP website says.

Official data revealed that in terms of rupees, the total value of mobile phone imports stood at Rs364.684 billion during July-February 2025-26, compared to Rs278.162 billion, registering 31.10% growth.

On a month-on-month (MoM) basis, Pakistan’s mobile phone imports saw a 13.26% negative growth, totaling $155.547 million in February 2026, compared to $179.336 million in January 2026.

Year on year mobile imports witnessed a 17.95% growth when compared to $131.870 million in February 2025.

Pakistan imported mobile phones worth $1.494 billion in the fiscal year 2024-25, registering a fall of 21.31%, compared to $1.898 billion during the previous year, 2023-24.

In terms of Pakistani rupees, the total value of mobile phone imports stood at Rs417.351 billion during the fiscal year 2024-25.

This represents a 22.09% decline when compared to Rs535.690 billion in the same period of 2023-24.

Also read: Pakistan’s mobile phone imports surge 31.4% to $1.139bn in first seven months of FY2025–26

Overall telecom imports into Pakistan stood at $2.099 billion during the fiscal year 2024-25, reflecting a negative growth of 11.30% when compared to $2.366 billion during the same period of 2023-24.

The local manufacturing/ assembling plants manufactured/ assembled 1.69 million mobile handsets during the first month of the calendar year 2026 (January) 2026 compared to 0.47 million imported commercially

The local manufacturing/ assembling plants manufactured/assembled 30.21 million mobile handsets during the calendar year (January-December) 2025 compared to 2.37 million imported commercially.

The local manufacturing/ assembling plants manufactured/ assembled 1.69 million mobile handsets included 0.92 million smart phones and 0.77 million 2G phones.

Besides, as per the Pakistan Telecommunication Authority data, 71% of mobile devices are smartphones, and 29% are 2G on the Pakistan network.

Remittance inflow since Jan 2024

The inflow of overseas workers’ remittances into Pakistan stood at $3.29 billion in February 2026, the State Bank of Pakistan (SBP) data showed on Tuesday.

Remittances increased by 5.2% year-on-year (YoY), compared to $3.12 billion recorded in the same month last year. Monthly remittances were down 5% from $3.46 billion in January.

During the first eight months of the fiscal year (8MFY26), remittance inflows stood at $26.49 billion, up from $23.98 billion in 8MFY25, a jump of 10.5%.

Remittances play a significant role in supporting the country’s external account, stimulating Pakistan’s economic activity, and supplementing the disposable incomes of remittance-dependent households.

Meanwhile, the government promotes remittances through incentives and formal channels to sustain steady growth and ensure their role in economic stability.

Last year, SBP noted that since 2009, the Pakistan Remittance Initiative (PRI) has been working to enhance home remittances through formal channels in Pakistan. As a result of active engagements with financial institutions (FIs), the number of FIs on the PRI network has increased from around 25 in 2009 to more than 50 in 2024.

The FIs include conventional banks, Islamic banks, microfinance banks, and Exchange Companies (ECs).

Further, Electronic Money Institutions (EMIs) are also allowed to receive home remittances through banks. The number of international entities has increased from around 45 in 2009 to around 400 at present.

Breakdown of remittances

Overseas Pakistanis in the United Arab Emirates remitted the largest amount in January 2026, sending $696.2 million. The amount was up 6% on a yearly basis, and an increase of 6% compared to the $658 million sent by the expatriates in January.

Inflows from Saudi Arabia declined by 8% on a yearly basis, from $745 million to $685.5 million in February 2026.

Remittances from the UK amounted to $532 million during February 2026, down by 7% compared to $575 million in January 2025. YoY inflows from the UK were up by 7%.

Overseas Pakistanis in the US sent $319.5 million in February 2026, a YoY increase of 3%, and up 8% on a monthly basis.

Meanwhile, remittances from European Union (EU) countries clocked in at $395 million in February, recording a significant increase of 15% on a yearly basis.

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 7% on a year-on-year (YoY) basis in February 2026, the highest since October 2024, showed Pakistan Bureau of Statistics (PBS) data on Monday, a reading in line with the Ministry of Finance’s estimate of 6-7%.

The consumer price index (CPI) was recorded at 5.8% in January 2026. The CPI stood at 1.5% in February 2025.

On month-on-month basis, it increased by 0.3% in February 2026 as compared to an increase of 0.4% in the previous month and a decrease of 0.8% in February 2025.

This took 8MFY26 inflation at 5.46% against 5.85% in 8MFY25.

CPI inflation (Urban) increased by 6.8% on year-on-year basis in February 2026 as compared to an increase of 5.8% in the previous month and an increased of 1.8% in February 2025.

On month-on-month basis, it increased by 0.3% in February 2026 as compared to an increase of 0.2% in the previous month and a decrease of 0.7% in February 2025.

CPI inflation (Rural) increased by 7.3% on year-on-year basis in February 2026 as compared to an increase of 5.8% in the previous month and 1.1% in February 2025.

On month-on-month basis, it increased by 0.3% in February 2026 as compared to an increase of 0.6% in the previous month and a decrease of 1.1% in February 2025.

In its Monthly Economic Update & Outlook, February 2026, the Finance Division had seen February inflation figures at 6-7%.

Earlier, Optimus Capital Management, a brokerage house, said that Pakistan’s inflation is set to edge higher in February 2026, with expectations of 7.4% YoY, reflecting pressures from rising electricity and gold prices.

Last month, the State Bank of Pakistan (SBP) decided to keep its benchmark policy rate unchanged at 10.5% in its first Monetary Policy Committee (MPC) meeting of 2026.

The decision was against the market expectations, which was hoping for a a rate cut.

SBP Governor Jameel Ahmad announced the MPC decision in a press conference. Inflation in Pakistan could be above 7% in the current fiscal year’s second half, he said.

The government expects the Consumer Price Index (CPI) to be in the range of 5-7% for the full fiscal year 2025-26.

“Inflation is expected to remain within the range of 6-7% in February,” Federal Ministry of Finance said in its latest monthly economic update and outlook, February 2026.

Also read: Pakistan’s inflation to clock in at 7.4% in February, highest in 18 months: report

“On average, during July-January FY26, it [inflation] stood at 5.2% as against 6.5% during the same period last year,” the monthly outlook read.

The ministry report stated that the economic activity was expected to maintain its upward trajectory in the ongoing fiscal year (FY26), supported by sustained macroeconomic stability, easing inflationary pressures, and an improved fiscal position.

The accommodative monetary policy, alongside continued fiscal consolidation and structural reforms, is likely to reinforce business confidence and private sector activity, according to the report.

“Growth is projected to be driven by a rebound in large-scale manufacturing (LSM), improved remittances, and resilient agricultural performance, while the external sector is expected to remain manageable amid stable exchange rate and contained current account pressures,” it said.

“Meanwhile, downside risks persist, particularly from geopolitical uncertainties and global commodity price volatility. However, the prudent macroeconomic management is expected to safeguard the stability.”

Also read: Investor count surpasses 500,000 at Pakistan Stock Exchange

Pakistan economic entered the third quarter of FY26 with improved macroeconomic fundamentals. Exchange rate stability, sustained growth in workers’ remittances, and rising IT exports have contributed to a manageable current account position‒collectively strengthening the external sector position.

“Further, fiscal consolidation has improved, with surplus in both fiscal and primary balances. In parallel, a sizeable portion of public debt was retired ahead of schedule marking a significant step in prudent debt management…

“Overall, the growth prospects have improved significantly, with momentum likely to strengthen in the remaining fiscal year, leading towards sustainable economic growth,” the report said.

In January 2026, the MNCs’ profit outflow from Pakistan stood at $118.9 million, 15.5% higher compared to January 2025 and 34% up compared to the previous month of December 2025, according to State Bank of Pakistan’s (SBP) data released on Thursday.

Foreign firms sent profit and dividend worth $102.39 million in January 2025 and $88.8 million in December 2025.

MNCs operating in power sector dispatched the highest amount of profit and dividend at $41.1 million in January 2026, followed by companies running in transport sector at $24.5 million in the month. Food companies repatriated $18.7 million and communication firms sent $14.6 million in the month under review.

Cumulatively in the first seven months of FY26; foreign companies working in power sector sent the single largest profit and dividend worth $400.2 million, followed by financial businesses at $371.3 million.

Companies operating in food sector sent $142.4 million and $132.3 million from communication sector in 7MFY26. Beverages, tobacco and cigarette, chemicals, petroleum refineries, oil and gas exploration, pharmaceutical & OTC products, electronic, transport equipment (automobiles), transport, and storage facilities recorded the repatriation of profit in range of $14 million to $91 million in the seven months.

Food, power, oil and gas exploration, financial business and transport were the top five sectors dispatchers profit and dividend in the range of $85.5 million to $263 million in the same seven month of the previous fiscal year (FY25).

The repatriation of profit and dividend has surged apparently in the backdrop of the increased availability of foreign exchange (FX) reserves in the country and announcement of profit and dividend by companies listed at the Pakistan Stock Exchange (PSX) and others.

JS Global Capital, Country Head Sales, Syed Faran Rizvi recalled the then sharp decline in FX reserves had kept MNC dividends parked in Pakistan during FY23.

However, as reserves began to build up again, there was a massive surge in the overall total repatriation, according to Rizvi, rocketing from just $331 million in FY23 to over $2.2 billion in FY24 and steady at similar levels in FY25 and FY26.

“A huge driver of this jump was the food sector, which exploded from practically nothing ($0.7 million) in FY23 to a leading $306.1 million by FY25 and continued to remain among top repatriates in FY26.

“We also saw impressive growth in tobacco & cigarettes, which climbed rapidly to $130.5 million, while beverages and chemicals maintained strong, consistent upward trends over the three-year period (FY23 to FY25),” Rizvi said.

The country’s trade balance, the gap between exports and imports, was recorded at a deficit of $17.19 billion in July-January of the previous fiscal year (7MFY25).

The trade deficit expanded year-on-year (YoY) in the said period, driven by higher imports and a decrease in exports.

Exports in 7MFY26 stood at $18.20 billion, down 7.1% against $19.58 billion recorded in the same period of FY25.

Also read: Pakistan’s trade deficit surges 24% YoY to $3.7bn in December 2025

Imports were recorded at $40.23 billion, up 9.42% against $36.77 billion in the same period last year.

Exports cross $3 billion in January 2026

Meanwhile, Pakistan’s exports clocked in at $3.06 billion in January 2026, up 3.73% against $2.95 billion recorded in January 2025.

On the other hand, imports stood at $5.79 billion in January 2026, down 1.41% against $5.87 billion recorded in the same period the previous year.

Also read: Inflation in Pakistan clocks in at 5.8% in January 2026

In January 2026, the country’s trade deficit stood at $2.72 billion, down 6.61% against $2.92 billion in January 2025.

On a monthly basis, Pakistan’s trade deficit declined 28.53% against $3.81 recorded in December 2025.

Rupee's Performance Against US Dollar Since 04 March 2025

The Pakistani rupee posted marginal gain against the US dollar in the inter-bank market on Monday.

At close, the local currency settled at 279.76, a gain of Re0.01 against the greenback.

On Friday, the local unit closed at 279.77.

Pakistan’s headline inflation clocked in at 5.8% on a year-on-year (YoY) basis in January 2026, showed Pakistan Bureau of Statistics (PBS) data on Monday, a reading in line with the Ministry of Finance’s estimate of 5-6%.

The consumer price index (CPI) was recorded at 5.6% in December 2025. The CPI stood at 2.4% in January 2025.

The country’s trade deficit significantly increased by 28.22% to $22.04 billion in the first seven months of the current fiscal year (7MFY26), as compared to the same period of the previous year, data released by the Pakistan Bureau of Statistics (PBS) showed.

Trade balance, the gap between exports and imports, was recorded at a deficit of $17.19 billion in July-January of the previous fiscal year (7MFY25).

The dollar clung to its gains on Monday as investors weighed what a Federal Reserve under Kevin Warsh ​might look like, with his preference for a smaller balance sheet.

The yen was also back on traders’ radars, ‌after Japanese Prime Minister Sanae Takaichi over the weekend talked up the benefits of a weaker yen in a campaign speech, in a tone at odds with her finance ministry that has worked to stem the currency’s declines.

US President Donald Trump’s pick of Warsh as the next Fed Chair sparked a wave of selling across risky assets and sent precious metals tumbling on Friday, while the dollar clawed back its losses ‌from earlier last week.

While investors think Warsh will be inclined to cut rates, they expect him ​to rein in the Fed’s balance sheet, which is typically supportive for the dollar as it reduces the money supply in the market.

The greenback remained on the front foot in early Asia trade on Monday, leaving the euro firmly away from the $1.20 ‍level as it last stood at $1.1848.

Sterling was down 0.05% to $1.3680, while the dollar index steadied at 97.22 after jumping 1% on Friday.

Oil prices, a key indicator of currency parity, fell more than 4% on Monday after U.S. President Donald Trump said Iran was “seriously talking” with Washington, signalling a de-escalation of tensions with an OPEC member, while a stronger dollar also weighed on prices.

Brent crude futures were down $3.34, or 4.8%, at $65.98 per barrel at 1113 GMT. US West Texas Intermediate crude fell $3.37, or 5.2%, to $61.84 per barrel.

Brent and WTI fell after posting their biggest monthly increase since 2022 in January, as risks of a military strike on Iran receded after Trump’s weekend comments. Brent gained 16% in January, while WTI rose by 13%.

Inter-bank market rates for dollar on Monday

BID Rs 279.76

OFFER Rs 279.96

Open-market movement

In the open market, the PKR lost 2 paise for buying and gained 2 paise for selling against USD, closing at 280.24 and 280.80, respectively.

Against Euro, the PKR gained 1.56 rupee for buying and 1.64 rupee for selling, closing at 332.16 and 335.20, respectively.

Against UAE Dirham, the PKR lost 4 paise for buying and gained 6 paise for selling, closing at 76.53 and 77.23, respectively.

Against Saudi Riyal, the PKR remained unchanged for buying and gained 5 paise for selling, closing at 74.80 and 75.37, respectively.

Open-market rates for dollar on Monday

BID Rs 280.24

OFFER Rs 280.80

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 5.8% on a year-on-year (YoY) basis in January 2026, showed Pakistan Bureau of Statistics (PBS) data on Monday, a reading in line with the Ministry of Finance’s estimate of 5-6%.

The consumer price index (CPI) was recorded at 5.6% in December 2025. The CPI stood at 2.4% in January 2025.

On month-on-month (MoM) basis, it increased by 0.4% in January 2026 as compared to a decrease of 0.4% in the previous month and an increase of 0.2% in January 2025.

This took 7MFY26 inflation at 5.24% vs 6.50% in 7MFY25.

CPI inflation (Urban) remained stable at 5.8% on year-on-year basis in January 2026 as compared to the previous month and an increased by 2.7% in January 2025.

On MoM basis, it increased by 0.2% in January 2026 as compared to a decrease of 0.4% in the previous month and an increase of 0.2% in January 2025.

CPI inflation (Rural) increased by 5.8% on year-on-year basis in January 2026 as compared to an increase of 5.4% in the previous month and 1.9% in January 2025.

On MoM basis, it increased by 0.6% in January 2026 as compared to a decrease of 0.6% in the previous month and an increase of 0.2% in January 2025.

In its Monthly Economic Update & Outlook January 2026, the Finance Division had seen January inflation figures at 5-6%.

Last week, the State Bank of Pakistan (SBP) decided to keep its benchmark policy rate unchanged at 10.5% in its first Monetary Policy Committee (MPC) meeting of 2026.

The decision was against the market expectations, which was hoping for a a rate cut.

SBP Governor Jameel Ahmad announced the MPC decision in a press conference.

Inflation in Pakistan could be above 7% in the current fiscal year’s second half, he said.

The country’s gross domestic product (GDP) would grow by 3.75% to 4.75% this year, Ahmad envisaged.

A REER above 100 means the country’s exports are uncompetitive, while imports are cheaper. The situation reverses when REER stands below 100 on the index.

As per SBP’s latest data, the REER decreased nearly 1.09% month-on-month (MoM) in December 2025.

When compared with December 2024, the REER value increased 0.06%, standing at 103.67.

“Pakistan REER has decreased to 103.73 in December 2025, higher than the last 10-year average of 103.0,” said Topline Securities. “A rising REER, i.e. greater than 100, suggests that the relative value of the home currency is becoming overvalued compared to peer countries,” it added

Meanwhile, the SBP says a REER index of 100 should not be misinterpreted as denoting the equilibrium value of the currency.

“Movement of the REER away from 100 simply reflects changes relative to its average value in 2010 and is unrelated to its equilibrium value,” the central bank said in an explanatory note on the topic.

Meanwhile, the Nominal Effective Exchange Rate Index (NEER) decreased by 0.54% MoM in December 2025 to a provisional value of 37.97 from 38.18 in November 2025.

On a yearly basis, the NEER index decreased by 3% from the value of 39.15 in December 2024.

What is REER?

As per the central bank, REER is an index of the price of a basket of goods in one country relative to the price of the same basket in that country’s major trading partners.

“The prices of these baskets are expressed in the same currency using the nominal exchange rate with each trading partner. The price of each trading partner’s basket is weighted by its share in imports, exports, or total foreign trade,” the SBP website says.

The deficit follows a surplus of $98 million recorded in November 2025, which was originally reported to be at $100 million, and a surplus of $454 million in December 2024.

The deficit came on the back of a significantly higher import bill during the month.

In December 2025, the country’s total export of goods and services amounted to $3.69 billion, up nearly 20% as compared to $3.08 billion in the previous month.

Meanwhile, total imports totalled $7.04 billion in December 2025, a decrease of nearly 24%, compared to $5.69 billion in November 2025, according to SBP data.

During December 2025, Pakistan’s workers’ remittance inflows totalled $3.59 billion, compared to $3.19 billion in November 2025, representing a 13% increase on a monthly basis.

During the H1FY26, the current account recorded a cumulative deficit of $1,174 million, as compared to a surplus of $957 million in the same period last year.

“The deficit comes mainly because of a sharp widening in the goods trade gap,” Saad Hanif, Head of Research at Ismail Iqbal Securities, told Business Recorder.

He added that higher imports, weaker exports and deterioration in services balance “outweighed still-strong remittance inflows, reversing November’s surplus”.

Waqas Ghani, Head of Research at JS Global, echoed similar sentiments.

“The deficit is due to a sharp rise in imports despite lower global commodity prices and higher remittances,” said Ghani.

“We expect the current account to close the ongoing fiscal year with a deficit, driven by rising imports,” he added.

Ghani noted that during 1HFY26, imports rose 12% YoY, reflecting economic normalisation and higher intermediate overall demand, while exports declined 5% YoY, keeping the trade gap wide at $15.8 billion.

Meanwhile, Pakistan’s foreign exchange reserves (excluding CRR/SCRR) rose to $16.19 billion, reflecting a substantial 36% rise year-on-year, indicating stronger external buffers despite ongoing structural pressures on the current account.

The country’s startups closed 16 deals of which 11 were disclosed, with total reported funding of around S74.23 million comprising both the equity only deals of $8.18 million and hybrid finance of $ 66.04 million, the report said.

The year 2025 witnessed a sharp shift towards hybrid financing, in contrast to 2024 that remained equity-heavy amid prolonged funding drought conditions.

• Equity financing involves selling a stake in the company to investors in exchange for capital, which does not require repayment but dilutes the founders’ ownership and often gives investors a say in decision-making.
• Debt financing means borrowing money that must be repaid over time with interest, allowing founders to retain full ownership, though it creates fixed repayment obligations that can strain cash flows, especially in early stages.
• Hybrid financing combines elements of both equity and debt.

A total of 11 disclosed transactions were recorded across pre-seed, seed, and Series A stages, along with five additional rounds with undisclosed or quiet ticket sizes. These included XpertFlow, Blink, VMNebula, Lean Outset, and Chrio.

The $74.23 million funding was primarily driven by large funding rounds such as Haball’s $52 million and MedIQ’s $6 million. These were complemented by seed-stage investments in BusCaro, Metric–Max CF-AI, ScholarBee, NewVative, Shadiyana, Qist Bazaar, and myco.io.

Read more: Pakistani fintech Haball secures $52mn funding to grow Islamic finance business, plans Middle East foray

Key startup sectors included fintech and healthtech, edtech, wedding-tech, sports tech, mobility, logistics, energy, internet of things (IoT), entertainment, and e-commerce.

The final quarter of 2025 proved to be a signal-setting period rather than a volume-driven one. While the headline deal count remained subdued and most of the $74.23 million in equity and hybrid financing had been deployed earlier in the year, the last quarter revealed decisive structural shifts.

Notably, new categories emerged as alternative debt and Shariah-compliant capital moved into the mainstream, while exits validated growth-to-liquidity pathways.

Female founders and mixed-gender teams remained central to the 2025 deal flow. Female-founded and co-founded startups—including Shadiyana, BusCaro, Metric, MedIQ, and Lean Outset—accounted for eight of the 11 disclosed deals. These spanned pre-seed, seed, and Series A rounds across fintech, mobility, healthtech, and wedding-tech sectors.

Mehwish Salman Ali, Founder and CEO of Data Vault Pakistan and ZahanatAI, said the rise of women-led startups was an encouraging sign for the country’s entrepreneurial landscape, as “this trend will not only inspire more female professionals to launch startups but will also empower women employees within startups to unleash their talent with creativity and dedication”.

She added that women-driven initiatives were likely to introduce new ideas and generate sustainable economic activity across the country, extending beyond urban centers into rural areas.

“I am optimistic the trend will continue n 2026 and more female entrepreneurs will lead the startups, particularly in tech and artificial intelligence,” she remarked.

The final quarter also highlighted diversification in venture-scale financing. KalPay secured structured Shariah-compliant debt from Accelerate Prosperity, underscoring the shift of Shariah-compliant debt from a niche instrument to the mainstream.

This development positions debt financing as a viable structure for fintech startups, particularly in education and BNPL-focused ventures, expanding access to capital beyond traditional equity routes.

Meanwhile, Agrilift and Echooo AI—both backed by Accelerate Prosperity—reflected a parallel trend of debt financing diversification across non-fintech verticals, including agri-tech, climate-linked productivity, and creator economy infrastructure.

Collectively, these developments signal growing confidence in debt as a financing tool, enabling broader capital deployment across climate, agriculture, and digital services as the ecosystem moves toward 2026.

Azfar Hussain, Project Director at the National Incubation Center Karachi, said 2025 marked a period of correction and maturity for Pakistan’s startup ecosystem. He noted that capital became more selective, filtering out hype-driven ventures while strengthening founders focused on solving real-world problems.

Looking ahead, he said growth in 2026 would increasingly favour founders who invest in governance, product depth, and regional scalability rather than pursuing rapid expansion or vanity metrics. According to him, the ecosystem is entering a phase where business-first thinking outweighs fundraising-first narratives.

He further emphasised that startups with a strong understanding of compliance, balance sheets, and institutional collaboration would be best positioned, as capital would increasingly flow toward ventures combining impact, resilience, and commercial viability.

Last week, another think tank Data Darbar reported that startups in Pakistan had observed a modest recovery in equity funding during 2025, with capital raised climbing to $36.6 million from $22.5 million a year earlier, reflecting an increase of nearly 63%.

However, despite the uptick, funding levels remain well below historical peaks, as shown by data released by Data Darbar.

“Based on press or social media announcements, startups raised approximately $36.6 million in equity capital across 10 rounds, while four additional transactions did not disclose dollar values,” read the report.

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 5.6% on a year-on-year (YoY) basis in December 2025, showed Pakistan Bureau of Statistics (PBS) data on Thursday, a reading in line with the Ministry of Finance estimate of 5.5-6.5%.

The consumer price index (CPI) was recorded at 6.1% in November 2025. The CPI stood at 4.1% in December 2024.

On a month-on-month basis, it decreased by 0.4% in December 2025, as compared to an increase of 0.4% in the previous month and an increase of 0.1% in December 2024.

This takes the 6MFY26 inflation reading at 5.15% against 7.22% in 6MFY25.

CPI inflation (Urban) increased by 5.8% on a year-on-year basis in December 2025, as compared to an increase of 6.1% in the previous month and 4.4% in December 2024.

On a month-on-month basis, it decreased by 0.4% in December 2025 as compared to an increase of 0.5% in the previous month and a decrease of 0.1% in December 2024.

CPI inflation (Rural) increased by 5.4% on a year-on-year basis in December 2025, as compared to an increase of 6.3% in the previous month and 3.6% in December 2024.

On a month-on-month basis, it decreased by 0.6% in December 2025, as compared to an increase of 0.2% in the previous month and an increase of 0.3% in December 2024.

In its monthly outlook released on Wednesday, the Ministry of Finance has projected that inflation readings will remain in the range of 5.5% to 6.5% in December 2025.

“Inflation is projected to remain moderate, in the range of 5.5-6.5% in December, primarily reflecting base effect,” it said.

However, the reading is lower than the expectations of several brokerage houses.

Topline Securities expected Pakistan’s CPI for December 2025 to clock in at 5.75-6.25% YoY compared to 6.15% in November 2025 and 4.07% in December 2024. “On a MoM basis, inflation for December 2025 is projected at -0.18%”.

Meanwhile, JS Global expected CPI to clock in close to 6.0% for December 2025. “For 1HFY26, average inflation is likely to clock in at ~5.2%, compared to 7.3% during the same period last year,” it said.

“This is 2.15% more than the corresponding number of Q1 2024-25,” said the federal minister in a social media post.

“This defines a qualitative change in the trajectory of GDP compared to 2024-25…. More encouraging is that it is coming from Industrial growth, which in 2025-26 Q1 is 9.38%, which in Q1 of 2024-25 was 0.12%.

“It should not be ignored that this growth is coming despite the 2025 flood shock and absorption of all fiscal tightening, energy subsidy withdrawal, and food inflation,” he added.

Pakistan posted GDP growth of 3.04% during FY2025, estimates released by the Pakistan Bureau of Statistics (PBS) in October showed. The growth was higher than the 2.68% estimated by the National Accounts Committee (NAC) during the previous meeting.

According to NAC, the overall size of the economy in FY2025 stood at Rs113.7 trillion, i.e. $407.2 billion, as compared to Rs105.2 trillion, i.e. $371.8 billion, in the previous year.

Further, per capita income in Rupees is 506,188 or $1,812, the NAC data showed.

In July-November period of the fiscal year 2025-26, Pakistan rice exports declined by 40.02% in volume, with shipments of IRRI-6 and IRRI-9 (non-basmati rice) falling by 39.70%, while basmati rice exports dropped by 41.79%, Pakistan Bureau of Statistics (PBS) data showed.

“In the international market, Indian rice is priced lower, while Pakistani rice remains relatively expensive, leading to reduced demand for Pakistan’s rice exports,” Rice Exporters Association of Pakistan’s (REAP) senior vice president Muhammad Javed Jillani told Business Recorder.

“Due to reduced liquidity in the international market, non-basmati rice, which was previously exported at around 550 dollars per ton, was exported this time at around 350 dollars per ton.”

In value terms, rice exports fell even more sharply, declining by 49.24% in dollar terms. Exports of IRRI-6 and IRRI-9 in dollar terms decreased by 53.23%, whereas basmati rice exports registered a decline of 37.58%, as PBS data.

The re-entry of Indian rice into global markets significantly increased supply, exerting downward pressure on international prices and simultaneously displacing Pakistani rice in price-sensitive markets.

During the first five months of the fiscal year 2025-26, the country’s trade deficit increased by over 37% to $15.47 billion from $11.28 billion recorded in the same period last year (SPLY). Exports in 5MFY26 decreased by over 6% to $12.84 billion from $13.72 billion in SPLY.

Arif Habib Commodities CEO Ahsan Mehanti said rice production had declined due to the damage caused by floods.

He further said a decline in soft commodity prices in the international market had also been a major reason for the reduction in Pakistan’s export volume.

According to him, prices of soft commodities have fallen in the international market, while prices of gold and silver increased.

“In the coming period, Pakistan’s export numbers will improve as the effects of the floods subside. Along with this, higher tariff rates imposed on India and dumping accusation of rice in United States by India will benefit Pakistan,” he envisaged.

Meanwhile, Policy Research & Advisory Council (PRAC) Head of Research Dr Usama Ehsan Khan told Business Recorder Pakistan’s rice exports recorded a sharp decline of 56%, falling from $431.37 million in November 2024 to $188.13 million in November 2025.

Elaborating the number Khan said of the total reduction of $243.25 million, detailed decomposition showed that $195.85 million was due to a contraction in export quantities, while $47.40 million resulted from lower international prices.

“This indicates that the decline was driven predominantly by volume losses rather than price effects alone.”

Khan said a key external factor behind the downturn was intensified international competition following India’s removal of restrictions on rice exports.

“The re-entry of Indian rice into global markets significantly increased supply, exerting downward pressure on international prices and simultaneously displacing Pakistani rice in price-sensitive markets.

“Domestic policies have also adversely impacted the exports of rice as well as other sectors. The shift from the Final Tax Regime (FTR) to the Normal Tax Regime (NTR) substantially altered exporters’ cost structures.

“Under the previous FTR, exporters faced a simplified 1% turnover tax, whereas the NTR imposes a 29% corporate income tax, along with up to 10% Super Tax. This abrupt transition sharply compressed exporters’ margins and increased compliance risks, particularly amid widespread concerns over mandatory tax audits and regulatory uncertainty,” Khan said.

In addition, export financing costs in Pakistan rose markedly, with borrowing rates estimated to be around 600 basis points higher than those faced by Indian exporters. Elevated interest rates, combined with higher tax liabilities, significantly weakened Pakistan’s price competitiveness at a time when Indian exporters benefited from subsidised financing and a more supportive policy environment, according to PRAC official.

“Taken together, external competitive pressures and internal policy distortions jointly undermined Pakistan’s rice export performance. Without addressing structural issues related to taxation, financing costs, and regulatory certainty, Pakistan risks continued erosion of its market share in global rice trade, even in periods of stable production.”

Earlier this month, US President Donald Trump recently accused India of “dumping” its shipments into the US market, referring to a practice whereby a product is exported at a price lower than its normal price.

India later rejected US accusations that it was dumping rice in the US, saying its rice exports were primarily premium-grade basmati which typically commands higher prices than non-basmati varieties.

IT exports in 5MFY26 stood at $1.8 billion, according to data released by the State Bank of Pakistan (SBP).

The growth in information technology exports come in line with IT export companies growing client base globally, especially in the Gulf Cooperation Council (GCC) region; relaxation in the permissible retention limit by the SBP, increasing it from 35% to 50% in the Exporters’ Specialised Foreign Currency Accounts; allowance of equity investment abroad through these foreign currency accounts; and stability in Pakistan rupee against the US dollar encouraging IT exporters to bring higher portion of profits back to Pakistan.

Forex inflows: All sectors must share export-boost burden, not just textiles: Aurangzeb

Former chairman of Pakistan Software Houses Association (P@SHA), Muhammad Zohaib Khan said the continuation of the policy and the aggressive role of the ministry and association of IT companies continued to generate positive results for IT exports by each passing month, reflecting the steady growth in the IT exports.

He maintained that the growth in IT exports was the key component in stabilising the current account deficit of the country. “Hence, the government should continue to support IT industry with supportive policies.”

In the month of November, IT exports stood at $356 million, up by 14% YoY but down 8% month-on-month (MoM). The monthly IT exports in November were higher than the last 12-month average of $337 million.

Saad Shah, an IT exporter, said the government, along with IT companies, had continued its “aggressive strategy” to explore new markets, including the GCC and the Association of Southeast Asian Nations (ASEAN) regions, which reflected the positive development for IT industry on a long-term basis.

He pointed out that that IT exports could have been increase additionally if issues of internet were resolved on time because internet disruption and its slow speed hurt the productivity of IT companies.

According to a P@SHA survey, 62% of IT companies are maintaining specialised foreign currency accounts. SBP’s introduction of Equity Investment Abroad (EIA), allowing IT exporters to acquire interest in entities abroad using up to 50% proceeds from specialised foreign currency accounts is expected to continue helping boost confidence of IT exporters to remit proceeds back to Pakistan.

Chairman Pakistan Freelancers Association (PAFLA) Ibrahim Amin said the freelancers were playing a key role in the growth of IT exports in line with an increasing trend of freelancing in the country and worldwide.

He pointed out that a number of institutions were providing training to talented youth in Pakistan, resulting increased freelancers with more contribution to freelancing platforms.

It is estimated that IT industry is likely to cross a mark of $4 billion by the end of the current financial year. In the financial year 2024-25, Pakistan’s IT exports hit a record high of $3.8 billion, driven by innovation and quality service delivery.

The deficit follows a deficit of $291 million recorded in October 2025, which was originally reported to be at $112 million, and a surplus of $684 million in November 2024.

The surplus came the back of a significantly lower import bill during the month.

In November 2025, the country’s total export of goods and services amounted to $3.09 billion, down over 10% as compared to $3.44 billion in the previous month.

Meanwhile, total imports totalled $5.68 billion in November 2025, a decrease of nearly 12%, compared to $6.43 billion in October 2025, according to SBP data.

During November 2025, Pakistan’s workers’ remittance inflows totalled $3.19 billion, compared to $3.42 billion in October 2025, representing a 7% decrease on a monthly basis.

“Current account posted a surplus mainly due to a sharp compression in imports supported by lower global commodity prices, alongside resilient remittance inflows that more than offset weaker exports,” Waqas Ghani, Head of Research at JS Global, told Business Recorder.

Meanwhile, the surplus was supported by strong workers’ remittances, Saad Hanif of Ismail Iqbal Securities, told Business Recorder.

“Importantly, the goods trade deficit narrowed by around 10% MoM, falling to $2.45 billion, reflecting contained imports.

“Alongside a manageable services deficit of ~$140 million and a secondary income surplus of ~$3.43 billion, this helped comfortably offset the primary income outflow, keeping the current account in surplus for the month.”

During the 5MFY26, the current account recorded a cumulative deficit of $812 million, as compared to a surplus of $503 million in the same period last year.

Pakistan’s foreign exchange reserves (excluding CRR/SCRR) rose to $14.68 billion, reflecting a substantial 21% rise year-on-year, indicating stronger external buffers despite ongoing structural pressures on the current account.

The Pakistan Automotive Manufacturers Association (PAMA) on Thursday reported 43% hike in car sales (excluding jeeps and pickups) to 55,239 units in 5MFY26, against 38,597 units sold in the same period last year (SPLY).

“Monthly car sales have been steadily rising, reflecting a clear recovery in the auto sector. Improving economic sentiment and friendly and supportive policies by the government, easier approach of financing, introduction of new models, and major change in price reductions on several models by Original Equipment Manufacturers (OEMs) are encouraging consumers to return to the market,” automobile expert Shafiq Ahmed Shaikh said.

Car sales in Pakistan jump 46% in first four months of FY2025-26

In the month of November, car sales stood at 12,408 units, an increase of over 50% against 7,972 units sold in the same month last year. On a monthly basis, car sales decreased by 8%.

“Occasional month-to-month fluctuations occur due to seasonality. This momentum suggests that if economic stability and long term policies continues, the sector may sustain its upward trajectory in the coming months.”

Auto analyst Muhammad Sabir Shaikh said locals were nipping down to new vehicles or changing their vehicles after a few years.

“The policy shift will be witnessed in two-three years as both EV motorbikes and cars are quickly coming in the local market, while fuel-driven vehicles will disappear gradually as per the government initiatives following pollution in ten big cities of the country“,” he maintained.

The sales of jeeps and pickups rose by 62% to 19,803 units, trucks recorded 101% increase to 2,753 units, and buses sales rose 72% to 407 units respectively. Motorcycles and rickshaws sales also rose by 32% to 762,778 units.

However, farm tractors continued to face a decline due to lack of interest of agriculture landlords who have not been purchasing new tractors because of a significant fall in the agricultural output following climate change in the country.

The country’s trade balance, the gap between exports and imports, was recorded at a deficit of $2.15 billion in November 2024.

The trade deficit expanded year-on-year (YoY) in November 2025, driven by higher imports and a significant decrease in exports.

Exports in November 2025 stood at $2.39 billion, down 15.4% against $2.83 billion recorded in November 2024.

Meanwhile, imports were recorded at $5.25 billion, up over 5% against $4.98 billion in the same period last year (SPLY).

On a month-on-month (MoM) basis, the trade deficit fell nearly 12% in November 2025 against $3.24 billion in October 2025. The decline came amid a decrease in both exports and imports on a monthly basis

During the first five months of the fiscal year 2025-26 (5MFY26), the country’s trade deficit increased by over 37% to $15.47 billion from $11.28 billion recorded in SPLY.

Exports in 5MFY26 decreased by over 6% to $12.84 billion from $13.72 billion in SPLY.

On the other hand, imports in 5MFY26 rose by 13% to $28.3 billion from $25 billion recorded in 5MFY25.

Earlier, Pakistan’s current account deficit rose sharply by 256% in the first four months of this fiscal year (FY26), clocking in at $733 million during July to October FY26, compared with $206 million in the same period last year. This reflects a widening of $527 million.

Headline Inflation YoY

Pakistan’s headline inflation clocked in at 6.1% on a year-on-year (YoY) basis in November 2025, showed Pakistan Bureau of Statistics (PBS) data on Monday, a reading higher than the Ministry of Finance estimate of 5-6%.

The consumer price index (CPI) was recorded at 6.2% in October 2025. The CPI stood at 4.9% in November 2024.

On a month-on-month basis, it increased by 0.4% in November 2025 as compared to an increase of 1.8% in the previous month and an increase of 0.5% in November 2024.

This takes the 5MFY26 inflation reading at 5.01% against 7.88% in 5MFY25.

CPI inflation (Urban) increased by 6.1% on a year-on-year basis in November 2025, as compared to 6.0% in the previous month and 5.2% in November 2024. On a month-on-month basis, it increased by 0.5% in November 2025 as compared to an increase of 1.5% in the previous month and an increase of 0.5% in November 2024.

CPI inflation (Rural) increased by 6.3% on a year-on-year basis in November 2025, as compared to an increase of 6.6% in the previous month and 4.3% in November 2024. On a month-on-month basis, it increased by 0.2% in November 2025 as compared to an increase of 2.3% in the previous month and an increase of 0.5% in November 2024.

In its monthly outlook released last week, the Ministry of Finance has projected that inflation readings to remain in the range of 5% to 6% in November 2025, reporting that the “expected inflationary pressure is building up” again in the country.

“Inflation is expected to remain in the range of 5-6% in November, due to pressures on food prices and agricultural output,” the Finance Ministry said.

However, brokerage houses expected the inflation reading to notch up higher.

Topline Securities expected inflation to clock in at 6.5–7.0% YoY, reflecting pressures from food supply disruptions and energy price adjustments.

Topline attributed the increase to “the aftereffects of floods and the closure of the Afghan border in the country, affecting food supplies”.

Similarly, JS Global, another brokerage house, expects headline inflation to clock in at 6.3% YoY in November 2025, following an uptick in food inflation, which is projected to rise 7.2% YoY.

Last week, Jameel Ahmad, Governor of the State Bank of Pakistan (SBP), said that inflation has not only aligned with the central bank’s forecasts but is also “expected to remain within the 5–7% target band over the medium term”.

On a month-on-month (MoM) basis, inflation for November 2025 is projected at 0.8%.

“The MoM increase was driven by a rise of 1.52% food prices due to the aftereffects of floods and the closure of the Afghan border in the country, affecting food supplies,” read the report.

Topline shared that the key contributors to food inflation came from onions (59%), chicken (16%), meat (15%) and fresh vegetables (12%). There was also a 0.79% rise in the housing, water, electricity and gas category, the report noted.

Inflation in Pakistan has been a significant and persistent economic challenge, particularly in recent years. In May 2023, the Consumer Price Index (CPI) inflation rate hit a record high of 38%.

Following the peak, inflation showed a substantial and steady decline, dropping into single digits by September 2024 (6.9%) and reaching its lowest point at 0.3% in April 2025. Since the low point, the inflation rate has begun to climb again, indicating a recent acceleration in the cost of living.

In October 2025, Pakistan’s headline inflation clocked in at 6.2% on a year-on-year (YoY) basis. This was the highest in 11 months.

“With inflation expectations of 6.5-7.0% for November 2025, real rates will surge to 400-450bps, higher than Pakistan’s historic average of 200-300bps,” said Topline.

The brokerage house noted that a significant shift in global commodity prices remains a major variable that could alter the inflation trajectory moving forward.

Similarly, JS Global, another brokerage house, expects headline inflation to clock in at 6.3% YoY in November 2025, following an uptick in food inflation, which is projected to rise 7.2% YoY.

“A recent moderation in tomato prices has provided some relief; otherwise, the uptick in food inflation would have been even higher,” said JS Global.

On Wednesday, Jameel Ahmad, Governor of the State Bank of Pakistan (SBP), said that Inflation has not only aligned with the central bank’s forecasts but is also “expected to remain within the 5–7% target band over the medium term”.

JS Global expects SBP to maintain the policy rate unchanged at 11% in the upcoming Monetary Policy Committee (MPC) meeting, scheduled to be held in December.