KARACHI: Pakistan recorded a current account deficit (CAD) of $328 million in the first month of FY27, reflecting year-on-year and month-on-month improvements.

The country recorded a CAD of $814m in June, the last month of FY26 and $529m in July 2025.

However, data issued by the State Bank of Pakistan (SBP) on Tuesday showed that the main reason for this CAD was higher imports, which were more than double exports in July.

The details showed that merchandise exports in July were $3.008 billion against imports of $6.154bn.

Foreign direct investment plunges by 20pc

The situation was different in FY26, with exports of $2.750bn in July compared with imports of $5.429bn.

Services exports in July 2026-27 were recorded at $927m, compared with imports of $1.155bn. In the same month of FY26, services exports stood at $728m and imports at $1.032bn.

The government achieved a current account surplus of $1.838bn in FY25 — the first in two decades. In FY26, the CAD narrowed to $304m after the $814m gap in June wiped out gains made earlier in the year.

However, the government came under criticism for a $39.5bn trade deficit in FY26, which contributed to the current account shortfall. Despite remittance inflows of $41.5bn, which provided an opportunity to close FY26 with a surplus, higher imports of luxury items, food, and costly oil kept the balance in deficit.

Analysts cautioned that if the conflict in the Middle East persists for another three to six months, Pakistan’s oil import bill could rise sharply as the country meets about 70pc of its oil and gas requirements through imports.

Exporters support higher imports of raw materials for exportable goods, but the surge in imports in FY26 did not translate into a commensurate increase in exports.

The government has set an ambitious export target of $60bn under the ‘Uraan Pakistan’ programme, but current trends do not appear supportive of the goal.

FDI fails to improve

Meanwhile, the foreign direct investment (FDI) remained disappointing in the first month of FY27, reflecting poor economic performance on both the external and internal fronts.

The SBP data on Tuesday showed that FDI plunged 20pc to $178.6m in July, down from $223.5m in the same month last year.

The outgoing FY26 was the worst year, with FDI inflows declining 49pc to $1.077bn from $2.122bn in FY25.

The decline in FY26 was attributed to the war in the Gulf region, which deterred foreign investors from investing in Pakistan. However, many economists and analysts said the other major reason for the poor FDI was domestic economic performance. They said domestic investors are not in the field, and no one is taking risks to invest in the country, even as several companies have opened units abroad. At the same time, several multinational companies left Pakistan.

Analysts believe that the day-to-day reports about terrorism in the country and the uncertain Gulf region are enough for investors to sit and wait for better timing.

Published in Dawn, August 19th, 2026