ISLAMABAD: Pakistan’s external account pressures intensified in the first seven months of fiscal year 2026 as a 5.5 percent contraction in exports coupled with a 9.8 percent surge in imports significantly widened the trade deficit, pushing the current account into a USD1.1 billion deficit despite an 11.3 percent increase in workers’ remittances
This was revealed in Finance Division’s ‘Monthly Economic Update and Outlook February 2026’ released on Friday.
In January 2026, the current account recorded a surplus of USD121.0 million, bringing the aggregate position during July-January 2026 to a deficit of USD1.1 billion, compared to a surplus of USD0.6 billion recorded last year.
READ MORE: Pakistan posts $121mn current account surplus in January
Goods & services export recorded at USD23.9 billion compared to USD24.1billion last year, of which goods export stoodat USD18.3 billion. Goods & services import recorded at USD44.4billion compared to USD40.0 billion last year, where goods imports were USD36.7 billion.
Trade deficit of goods & services increased to USD20.5 billion from USD15.9 billion last year.
Finance Division data noted that the FDI totalled USD517.4 million during July–January fiscal year 2026, down from USD1.483 billion in the corresponding period of fiscal year 2025. However, improvement was witnessed in January 2026 as it increased to USD310 million against USD140.6 million in January 2025.
Main sources of net inflows were from China (USD495.5 million) and Hong Kong (USD188.4 million). Sector-wise, power (USD541.8 million) and financial services (USD462.0 million) attracted the most FDI. Private and public FPI recorded net outflows of USD287.6 million and USD176.4 million, respectively. As of February 13, 2026, foreign exchange reserves stood at USD21.3 billion, including USD16.2 billion with the SBP.
Finance Division noted that portfolio investment remained in the negative territory (-463.9 million USD against - 177 million USD in the same period last year) while Pakistan’s Stock Market index rose by a whopping 48.3 percent, market capitalisation by 35.4 percent and incorporation of companies by 26 percent.
The outlook also noted that downside risks persist, particularly from geopolitical uncertainties and global commodity price volatility.Inflation is expected to remain within the range of 6.0-7.0 percent in February, it added.
Remittances were up 11.3 percent to USD23.2 billion, led by inflows from Saudi Arabia (23.5% share) and UAE (20.6%). Monthly inflows for January reached USD3.5 billion, up 5.3 percent when compared to USD3 billion during the same month of last year.
CPI inflation recorded at 5.8 percent on YoY basis in January 2026 as compared to an increase of 5.6 percent in the previous month and 2.4 percent in January 2025. On average during Jul-Jan FY2026, it stood at 5.2 percent as against 6.5 percent during the same period last year.
Large-Scale Manufacturing (LSM) registered a growth of 4.8 percent during Jul-Dec FY2026 against the contraction of 1.8 percent last year.
During December 2025, LSM grew by 0.4 percent on year-on-year (YoY) basis and by a substantial growth of 9.3 percent on month-on-month (MoM) basis.
Goods & services export recorded at USD23.9 billion compared to USD24.1 billion last year, of which goods export stood at USD18.3 billion. Services export were primarily driven by IT services that increased by 19.8 percent to USD2.6 billion. Goods & services import recorded at USD44.4 billion compared to USD40.0 billion last year, where goods imports were USD36.7 billion. Trade deficit of goods & services increased to USD20.5 billion from USD15.9 billion last year.
Cumulative cement dispatches grew by 10.6 percent in Jul-Jan fiscal year 2026 and reached 30.6 million tonnes. During the Rabi season 2025-26, wheat has been sown on an area of around 23.1 million acres, compared to the target of 23.8 million acres, with targeted production at 29.7 million tonnes.
Credit flow to the private sector registered Rs638.2 billion during 1st July to 13th February fiscal year 2026 against Rs770.8 billion) during 1st July to 14th February fiscal year 2025.
The government’s strategy to optimize revenue collection and improve expenditure management is reflected in the overall fiscal position during Jul-Dec FY2026. Total revenue increased by 9.4 percent and reached Rs. 10,683.6 billion, which was contributed by growth in both tax and nontax revenues by 10.9 percent and 7.0 percent, respectively.
Total expenditure declined by 10.3 percent to Rs.10,141.7 billion. This contraction was mainly driven by curtailment of current expenditure,which fell by 5.2 percent on account of 30.7 percent decline in markup expenditure. Development expenditure, on the other hand, increased by 43.2 percent, largely contributed by provincial development spending.
Overall fiscal balance recorded a surplus of 0.4 percent of GDP (Rs. 541.9 billion) during Jul-Dec FY2026 as compared to a deficit of 1.3 percent of GDP (Rs. 1,537.9 billion) during the corresponding period last year.
Primary surplus was recorded at Rs. 4,105.5 billion (3.2% of GDP) as compared to Rs. 3,603.7 billion (3.2% of GDP) last year.
During Jul-Jan FY2026, the FBR’s tax collection grew by 10.5 percent and reached Rs. 7,176.9 billion. This growth was broadbased, driven by both direct and indirect taxes, which grew by 11.1 percent and 9.8 percent, respectively. Within indirect taxes, sales tax, customs duties, and federal excise duty increased by 10.3 percent, 5.4 percent and 15.2 percent, respectively.
During 1st Jul–30th Jan FY2026, money supply (M2) show growth of 2.3 percent compared to a contraction of 1.0 percent during the same period last year. Within M2, Net Foreign Assets (NFA) of the banking system increased by Rs. 473.5 billion as compared an increase of Rs. 744.0 billion last year.
On the other hand, Net Domestic Assets (NDA) of the banking sector increased by Rs. 459.8 billion as compared a decrease of Rs. 1,115.2 billion last year.
Under the borrowing for budgetary support, the government borrowed Rs. 158.9 billion against the retirement of Rs. 1,105.7 billion last year. Private sector borrowed Rs. 711.4 billion as compared to borrowing of Rs. 1,017.8 billion in last year.
In January 2026, the Bureau of Emigration & Overseas Employment registered 75,663 workers, a 19.0 percent increase from 63,559 in January, 2025.
The Pakistan Poverty Alleviation Fund, in partnership with 26 organizations, disbursed 10,321 interest-free loans worth Rs. 630.0 million during January 2026. Since 2019, a total of Rs. 123.4 billion have been provided to the borrowers. During Jul-Dec FY2026, Rs. 328.7 billion was disbursed under the BISP.
The data further noted that foreign direct investment (FDI) declined by approximately 65 percent during July–January fiscal year 2026 compared to the same period in fiscal year 2025.
Copyright Business Recorder, 2026