KARACHI: The government has not only increased the remittances target but also projected a significantly higher current account deficit (CAD) for FY27.

The government set $3.6 billion CAD for FY27, which would be around 0.7 per cent of the GDP, compared to the revised deficit target of $1.1bn or 0.2pc for FY26. So far, the current account deficit during July-April FY26 is $252 million against $1.662bn surplus during the same period the preceding year.

The main reason for the CAD was the widened trade deficit during the current fiscal year, which has reached $35bn in the first 11 months of FY26.

The export target for FY27 is $32.9bn, while the import target is set as $70bn, showing a trade deficit of $37.1bn. This large trade deficit would certainly force the current account deficit to expand in FY27.

Projects higher current account deficit at $3.6bn for next fiscal year

This year the trade deficit shock was absorbed mainly by the higher remittances while it also helped the government to pay back some of the external debt servicing and supported the State Bank to improve its foreign exchange reserves.

The government has set a $42.4bn remittances target for FY27, compared with $41.3bn for FY26. The remittances for FY26 were affected by the Gulf war, but inflows continued at the same pace; instead, they increased to a record $4.3bn in May FY26.

With the higher inflows, it seems the total would exceed the earlier target of $41.3bn set for FY26 on 30th June. The government had revised the target to $40bn in the wake of the Gulf war, which started on Feb 28.

According to the State Bank, the country received a total of $38.109bn during July-May FY26, compared to $34.829bn in the same period of the last fiscal year, representing growth of 9.2pc, down from 28.8pc in FY25.

The government set a higher target of $42.4b for remittances, as it observed that the Gulf war did not impact remittances; however, some financial experts expressed fear that rich Pakistanis were returning, particularly from Dubai, and that their remittances surged, boosting overall inflows for Pakistan.

Inflows from the Middle East increased by $1bn to $20bn in 11MFY26. Analysts believe that Pakistan would be able to achieve the higher remittances target set for FY27. They said the war-like situation has been prevailing in the Gulf region, but remittances for Pakistan remained positive.

Published in Dawn, June 13th, 2026