Pakistan's current account deficit shrinks 70% in August as external indicators improve

The State Bank of Pakistan has updated its balance-of-payments data for August 2026, while the Pakistan Bureau of Statistics has also released its latest foreign trade and industrial production figures. (State Bank of Pakistan)Workers’ remittances remained an important source of foreign exchange, increasing by 17% year-on-year to $7.3 billion during the first two months of the fiscal year.

The continued growth in remittances provides support to Pakistan’s external account and foreign exchange position. Services and IT exports maintain momentum. The services sector also recorded strong export growth.

Services exports increased by 29%, while IT exports rose by 17% on a year-on-year basis. Income generated by freelancers increased by 42%, highlighting the expanding contribution of digital and technology-based services to Pakistan’s export earnings.

The trend builds on the growing importance of technology services to the economy. The Pakistan Economic Survey 2025-26 reported that IT services had already become the main driver of services-export growth, supported by computer and information services, software consultancy and freelance-based digital services. (Finance Division)Industrial production shows improvement.

Large-scale manufacturing also showed signs of recovery. Industrial production increased by 3% year-on-year and registered a 9.5% increase on a month-on-month basis,. Improvement in large-scale manufacturing is significant because the sector has a direct bearing on employment, exports, tax revenues and demand across associated industries.

FDI rises sharply. Foreign direct investment was reported at $316 million, representing an 80% increase compared with the corresponding period last year and a 77% increase on a monthly basis. Corporate-sector indicators also showed improvement.

Corporate profits increased by 15% during FY2026, while registrations of new companies increased by 45% year-on-year. Meanwhile, cumulative inflows into Roshan Digital Accounts reached $13.9 billion. Capital-market activity has also picked up, with five initial public offerings reported during the first two months of FY2027 after 11 IPOs were completed during FY2026.

Pakistan’s external position has also been supported by higher foreign exchange reserves. The State Bank reported total liquid foreign exchange reserves of about $23.72 billion as of September 4, including $18.33 billion held by the central bank and $5.39 billion with commercial banks.