Pakistan posts $110m CA surplus in September

KARACHI: Pakistan’s current account returned to a surplus in September as the trade deficit narrowed, providing temporary relief to the country’s external finances.

The current account posted a surplus of $110 million in September, compared with the deficit of $325 million in the previous month and the $52 million shortfall in September 2024, according to State Bank of Pakistan data released on Monday.

However, in the first quarter of the fiscal year 2026, the nation’s current account deficit increased by 18 per cent to $594 million.In September, the current account balance reported a surprising surplus that caught analysts and markets off guard, as expectations were for a deficit. The last time a surplus was recorded in June.

Saad Hanif, head of research at Ismail Iqbal Securities, said that the surplus was a significant upside surprise compared with industry expectations of a deficit ranging from $400 million to $500 million. This unexpected result was primarily driven by a considerably lower trade deficit reported by the SBP, which stood at $2.4 billion, nearly $1 billion less than the $3.4 billion gap reported by the Pakistan Bureau of Statistics.

“The divergence likely stems from timing and accounting adjustments between customs and balance of payments reporting,” Hanif said.“This positive surprise could provide temporary support,” he added.

The latest balance of payments numbers came after Pakistan reached a staff-level agreement with the International Monetary Fund (IMF) last week, which would pave the way to unlock $1.2 billion in loans through two separate programmes. Specifically, Pakistan is set to receive a $1 billion tranche from its Extended Fund Facility and an additional $200 million from the Resilience and Sustainability Facility, which supports the country’s climate reform initiatives. However, this agreement is subject to approval by the IMF Executive Board.

Waqas Ghani, head of research at JS Global, noted that the improvement in the current account balance was mainly due to a reduced trade deficit. Exports increased by 5 percent month-on-month, while imports remained broadly stable.

“Additionally, services exports increased 18 per cent MoM while services imports declined 13%, supporting the overall balance,” Ghani said. “On the secondary income side, remittances remained steady at $3.2 billion (+1.0 per cent MoM), providing further support to the external account.”

The SBP in its annual report on the country economy for the fiscal year 2025, published last week, expects that moderate expansion in economic activity and flood-related shortages of agricultural commodities may lead to an increase in imports. Conversely, the slowdown in global demand and damage to agricultural production are expected to keep exports contained.

“However, lower US tariffs on Pakistan’s exports relative to the competitors may partly offset the fallout of floods and adverse global developments. Further, the workers’ remittances are maintaining the momentum and likely to partly offset the deterioration in trade deficit,” the report said.The SBP projects the current account deficit in the range of zero to 1.0 per cent of GDP in FY26.