Pakistan’s current account deficit narrowed significantly in August 2026, falling to $98 million as stronger remittance inflows and improvements in parts of the external account helped reduce the monthly shortfall.
The latest State Bank of Pakistan (SBP) data shows a major improvement compared with the same period last year, when Pakistan recorded a current account deficit of $324 million.
On a year-on-year basis, the deficit has therefore declined by approximately 70%.
Current Account Deficit Drops Sharply From July
The improvement was even more pronounced on a monthly basis.
Pakistan recorded a current account deficit of $445 million in July 2026, the opening month of fiscal year 2026-27.
With the deficit declining to $98 million in August, the monthly shortfall contracted by approximately 78%.
The July figure was also revised upward from an earlier reported estimate of $328 million.
Two-Month Deficit Falls 36%
Despite recording deficits in both July and August, Pakistan’s cumulative external position has improved compared with the beginning of the previous fiscal year.
During the first two months of FY2026-27, covering July and August, the country recorded a combined current account deficit of $543 million.
During the corresponding two months of FY2025-26, the deficit stood at $853 million.
This means the cumulative current account deficit has decreased by approximately 36% year-on-year.
Remittances Provide Important Support
Workers’ remittances remained an important source of support for Pakistan’s external account during August.
Remittance inflows reached approximately $3.66 billion, compared with around $3.14 billion during August of the previous year.
This represents year-on-year growth of nearly 17%.
Strong remittance inflows help Pakistan finance its import requirements and can reduce pressure on the current account by providing a significant and relatively stable source of foreign exchange.
Exports and Imports Both Increase
Pakistan’s international trade remained a significant factor affecting the current account.
Total exports of goods and services reached approximately $3.33 billion in August 2026, compared with around $3.17 billion in August 2025.
This represents an increase of more than 5% year-on-year.
However, imports also increased.
Pakistan’s total imports of goods and services reached approximately $6.64 billion during August, up from around $6.15 billion in the same month last year.
The faster growth in imports means Pakistan’s external account continues to face pressure from its trade imbalance despite the improvement in the headline current account deficit.
Goods Trade Deficit Shows Monthly Improvement
On a month-on-month basis, the goods trade balance provided some support to August’s current account performance.
According to market analysis, the goods trade deficit narrowed by approximately $127 million compared with July, reaching around $3 billion.
Goods imports during the month stood at roughly $5.5 billion, while goods exports were approximately $2.5 billion.
The improvement helped reduce the overall current account shortfall during August.
What Does a Smaller Current Account Deficit Mean?
The current account measures Pakistan’s transactions with the rest of the world, including trade in goods and services, income flows and transfers such as workers’ remittances.
A current account deficit occurs when outgoing foreign currency associated with these transactions exceeds incoming foreign currency.
A smaller deficit can therefore reduce pressure on the country’s external financing requirements and foreign exchange reserves.
However, a lower monthly deficit doesn’t necessarily mean that all underlying external-sector pressures have disappeared.
Import growth, the merchandise trade gap, global commodity prices and international oil prices remain important factors that could affect Pakistan’s external balance during the remainder of FY2026-27.
Pakistan’s External Account Shows Improvement
The August figures nevertheless represent a significant improvement compared with both July 2026 and August of last year.
The decline from $445 million in July to $98 million in August, combined with strong remittance inflows, has helped contain Pakistan’s cumulative current account deficit during the opening months of FY2026-27.
With the first two months producing a combined deficit of $543 million—36% below the comparable period last year—the direction of the external account has improved.
Whether this trend continues will depend on several factors, particularly remittance growth, export performance, imports and global energy prices in the coming months.