KARACHI: After a gap of 14 years, the financial year ended with a current account (CA) surplus, enabling the State Bank of Pakistan (SBP) to keep the external account manageable as the country steps into FY26.
According to the latest data issued by the SBP, the current account recorded a surplus of $2.105 billion in FY2024-25, compared to a net deficit of $2.072bn in the previous fiscal year.
Both the government and the SBP managed the external account prudently, helping maintain the surplus, which in turn supported exchange rate stability. This surplus also allowed the SBP to strengthen its foreign exchange reserves.
The key contributor to this surplus was the record remittance inflow of $38.3bn — 27 per cent higher than the previous year — providing crucial support to the SBP’s reserves.
While the SBP has not disclosed official figures for its dollar purchases from the inter-bank market, bankers and currency dealers estimate that the central bank bought around $8bn during FY25.
Financial experts believe that the new fiscal year (FY26) has begun with a number of positive developments, including a current account surplus, a stable exchange rate and higher foreign exchange reserves held by the State Bank — exceeding the $14bn target — as well as the continuation of the IMF programme.
Moreover, the country enjoys support from friendly nations, which rolled over about $16bn in loans during FY25. With the external account in good shape, there is potential for additional support from these countries in FY26. Preliminary estimates indicate that external debt servicing requirements for the current fiscal year range between $23bn and $26bn.
In June 2025, the current account showed a surplus of $328 million, a significant improvement from the $84m deficit recorded in May. For most of the year, the current account remained in surplus. Of the four quarters, only the first quarter (July-September FY25) showed a deficit of $474m.
The second quarter posted a surplus of $1.492bn, followed by $820m in the third quarter and $262m in the final quarter. However, the figures indicate that the surplus gradually declined from the second quarter onward.
Trade data also showed modest improvements. Exports of goods increased to $32.295bn from $30.980bn the previous year, while goods imports rose to $59.076bn from $53.157bn. Similarly, exports and imports of services rose slightly to $8.394bn and $11.014bn, respectively.
Despite these gains, international credit rating agencies have not yet upgraded Pakistan’s ratings — a key barrier to attracting foreign investment and issuing bonds in global markets. Senior officials from the Ministry of Finance recently held a meeting with Moody’s to advocate for an upgrade. Financial sector sources believe a rating improvement is likely if current trends continue through December 2025.
“Multi-year high reserves and a formidable current account surplus are a huge achievement. However, it’s strange to see forex liquidity remain sparse, with importers struggling to make timely payments,” said Faisal Mamsa, CEO of Tresmark, a firm specialising in global currency tracking.
Meanwhile, a series of meetings were held in Beijing with potential investors in Panda Bonds. The government aims to raise $200-300m from the Chinese capital market, which could pave the way for further bond offerings in the future.
Foreign direct investment
Meanwhile, Foreign Direct Investment (FDI) slightly improved in the financial year FY25 but did not reflect the government’s efforts to attract foreign investors.
According to the latest data released by the SBP on Friday, FDI in FY25 increased by 4.7pc to $2.457bn. The inflow in June was $206.6m — almost the same as June 2024, which recorded $205m.
Despite the government’s efforts to bring in foreign investment, neither the internal nor regional conditions were conducive for investors.
Financial experts said that Indian aggression and its continued hostile posture have made investment in Pakistan riskier. Additionally, the internal political situation remains uncertain, further discouraging foreign interest.
The recent war between Iran and Israel also impacted Pakistan, with trade with Iran falling to its lowest level.
Analysts believe that both conflicts have made the region unattractive for investment. They also pointed out that even domestic investment in the industrial sector has declined, citing unfavorable economic policies and growing tension between the trade and industrial sectors and policymakers.
The government remains hopeful that the sale of PIA and other assets this year will bring in foreign investment. However, a local company is expected to acquire the national flag carrier. The privatiation policy, overall, failed to attract FDI in FY25.
Meanwhile, the SBP also reported that the rupee hit a 21-month low on the Real Effective Exchange Rate (REER) index. The REER declined by 1.22 per cent to 96.61 points in June 2025, compared to 97.79 points in May.
PM credits economic team
Prime Minister Shehbaz Sharif hailed the increase in the current account surplus, saying that the main reason behind the stability in the current account surplus was the significant increase in remittances and exports. He added that, with each passing day, improving financial and economic indicators showed that the country’s economy was on the path to stability.
“The government is taking priority steps to further improve the business and investor-friendly environment in the country,” he remarked. “The efforts of the government’s economic team are commendable.”
Published in Dawn, July 19th, 2025
