Pakistan closed fiscal year 2026 with a nearly balanced current account and increased foreign exchange reserves, driven mainly by record remittance inflows rather than export growth. The country’s current account deficit for the year was just $139 million, with foreign reserves reaching around $18.4 billion by June-end, a $4 billion rise from the previous year. Despite these positive figures, Pakistan’s external stability hinges significantly on remittances rather than enhanced export performance.
The trade deficit for goods and services in Pakistan during FY26 amounted to approximately $35.5 billion, widening further to nearly $44 billion after factoring in primary income payments. The deficit was largely offset by secondary income inflows, particularly a record $41.6 billion from workers’ remittances. Notably, the current account improvement was primarily due to remittance-backed imports rather than export-driven progress.
During the fiscal year, Pakistan experienced a decline in goods exports alongside an increase in imports, underscoring the role of remittances in financing imports. The State Bank of Pakistan (SBP) also bolstered foreign reserves by purchasing dollars from the interbank market post the balance-of-payments crisis. However, analysts caution that this reserve accumulation is more a result of absorbing excess foreign currency from remittances rather than a fundamental increase in Pakistan’s external earnings.
The report highlights Pakistan’s heightened reliance on remittances, which exposes the country to geopolitical shifts in the Middle East, emphasizing the need for diversified economic strategies.
