Current account slips into $139m deficit in FY26

• CAD gap hits $649m in June

• Foreign direct investment declines 34pc to $1.64bn

KARACHI: Pakistan ended the outgoing fiscal year with a current account deficit (CAD) of $139 million, reversing a surplus of $1.838 billion recorded in 2024-25, the State Bank of Pakistan reported on Friday.

The deficit remained negligible compared to the sharp monthly deficit recorded in June 2026, largely because of strong remittance inflows during the year.

The deficit had been widely expected after the Gulf war, which erupted on Feb 28, disrupted oil prices and affected Pakistan’s economy. However, the current account deficit remained under control mostly because of remittances, which rose to $41.585bn in FY26 from $38.3bn in FY25, an increase of about $3.3bn.

SBP data showed that the country posted a current account deficit of $649m in June compared to a surplus of $500m in May. The current account had posted a surplus of $220m in June 2025.

The trend shows that the economy was largely supported by remittances, as exports could not grow enough to reduce the current account pressure. Imports remained high, creating a trade deficit of over $35.5bn in FY26.

Goods exports dropped to $30.843bn in FY26 from $32.434bn a year ago. However, services exports increased to $10.034bn from $8.45bn, helping overall exports show marginal growth.

Exports of goods and services stood at $40.877bn in FY26 compared to $40.793bn a year ago, an increase of only $84m.

The current account remained under pressure for most of the year, as three of the four quarters recorded deficits. The first quarter posted a deficit of $737m, the second quarter $624m and the fourth quarter $425m.

Only the third quarter recorded a large surplus of $1.647bn, which helped keep the full-year current account deficit negligible.

With the Gulf war renewed and the situation becoming more complicated, the current account could see major changes in FY27, particularly if remittances are affected.

Economic and political analysts watching the rapidly changing situation in the Gulf fear that the conflict could involve more countries.

Oil prices have already gone up, making it harder for countries like Pakistan to avoid the negative impact of the war while maintaining slow but stable growth.

If the war continues, Pakistan may have to spend significantly more foreign exchange on oil imports, as the country depends on imported fuel for around 70pc of its needs.

The just-ended FY26 witnessed a large import bill of $76.4bn, but oil imports did not consume most of the dollars.

Financial experts said the ongoing war could sharply affect the oil import bill in FY27.

During FY26, Pakistan managed to purchase oil mostly at relatively lower prices due to pre-war purchases and later benefited from the ceasefire when oil prices fell and Iran allowed shipping through the Strait of Hormuz.

FDI falls 34pc

Meanwhile, foreign direct investment declined by 34pc in FY26, the State Bank reported on Friday.

FDI fell to $1.637bn during the year from $2.477bn in FY25, showing a decrease of $840m.

Pakistan has been facing an acute shortage of FDI for more than a decade and the Gulf war has further reduced chances of any improvement.

China remained the largest source of FDI, though inflows from the country were lower than the previous year. Chinese FDI stood at $862m in FY26 compared to $1.205bn in FY25.

Inflows from the Middle East, mostly pre-war investments, were also lower than in FY25.

Published in Dawn, July 18th, 2026 ...