KARACHI: The current account posted a surplus of $121 million in January against a deficit of $393m in the same month last year, data released by the State Bank of Pakistan (SBP) showed on Tuesday.

However, the balance for the first seven months of the current fiscal year remained in deficit compared to a half-billion surplus in the corresponding period of FY25.

According to the SBP, the current account registered a deficit of $1.074 billion during July-January FY26 compared to a surplus of $564m a year earlier. The government had earlier pointed to FY25’s annual current account surplus of $1.932bn as a sign of improving external stability.

The SBP data indicated that the deterioration over July-January was driven largely by the widening trade deficit, as imports rose and exports declined.

Seven-month balance remains in red as deficit tops $1bn

Imports increased to $36.662bn during the seven-month period, up from $33.383bn a year earlier, while exports slipped to $18.26bn from $19.327bn, contributing to the current account deficit of over $1bn.

Economists warn that if the current account deficit keeps increasing, it would largely disrupt the exchange rate, which has stabilised the economic image of the country on the external front.

It was known to many in the financial sector that the exchange rate is managed by the State Bank, but relatively higher foreign exchange reserves held by the SBP and increasing remittances helped the country to remain positive on the external front.

However, it is difficult for the government to keep its image strong on the external front with poor foreign direct investment and the recent outflow of foreign investment from the equity market.

On the positive side, remittances during July-January FY26 rose 11 per cent year-on-year, suggesting inflows could exceed the government’s $40bn target for the full year.

The SBP figures show that the first two quarters of FY26 recorded current account deficits, with December 2025 posting a deficit of $265m. The reason for the shift to a surplus in January was not immediately clear, though analysts attributed it largely to stronger remittance inflows, which may also have enabled higher imports and helped the SBP increase its reserves.

The current account deficit stood at $737m in the first quarter (July-September) and $458m in the second quarter (October-December).

Financial analysts said regional uncertainty had pushed up oil prices, while exports continued to face headwinds, which could negatively impact the economy.

Published in Dawn, February 18th, 2026