Pakistan’s current account saw a near balance in February, posting a minimal deficit of $12 million, a sharp improvement from $399 million in January. For 8MFY25, the country recorded a $691 million surplus, contrasting last year’s $1.73 billion deficit.
Despite this improvement, trade challenges persist. Imports fell by 8% to $5.0 billion, while exports declined by 13% to $2.6 billion in February. While declining commodity prices helped ease import costs, increasing loan repayments and a negative financial account continue to weigh on the balance of payments.
Key Trade and Economic Trends
- Imports and Exports: Machinery imports rose 22%, while textile imports surged 60%, reflecting weak domestic cotton production. Meanwhile, textile exports increased by 8%, driven by value-added segments.
- Services and IT Exports: IT exports remained stable at $305 million in February, bringing 8MFY25 IT export growth to 26% ($2.48 billion).
- Home Remittances: A crucial stabilizer, remittances hit $3.1 billion in February, bringing the 8MFY25 total to $24.0 billion, reflecting a 33% year-on-year increase.
Concerns Moving Forward
- Rising Trade Deficit: The goods and services deficit widened by 19% to $18.8 billion.
- Dwindling Capital Inflows: Foreign direct investment and foreign loans remain low, worsening the balance of payments crisis.
- Falling Reserves: SBP reserves have dropped by $984 million since mid-December, reflecting ongoing external vulnerabilities.
While seasonal remittances and declining global commodity prices offer temporary relief, Pakistan’s economic stability remains fragile amid trade imbalances and financial account deficits.
