Record $420m current account deficit posted in January 2025

Published on: February 19, 2025 11:22 AM

After registering surpluses in the last five months, Pakistan’s current account posted a deficit of $420 million in January 2025, a significant increase of 4% when compared with the deficit of $404 million in the same month of the previous year, data released on Tuesday by the State Bank of Pakistan (SBP) showed. This is the first current account deficit since July 2024. Meanwhile, for December, the surplus was originally reported to be at $582 million, but the SBP revised it in the latest data to be at $474 million. Overall, the figure takes Pakistan’s current account to a surplus of $682 million in the first seven months of the current fiscal year (7MFY25), in stark contrast to a massive deficit of $1.801 billion in the same period of the previous fiscal year. In January 2025, the country’s total export of goods and services amounted to $3.631 billion, up over 8% as compared to $3.362 billion in the same month of the previous year. Meanwhile, imports clocked in at $6.461 billion during January 2025, an increase of nearly 15% on a yearly basis, according to SBP data. Workers’ remittances clocked in at $3.002 billion, an increase of over 25% as compared to the previous year. Low economic growth along with high inflation have helped curtail Pakistan’s current account deficit with an increase in exports also helping the cause. A high interest rate, which has declined in recent months, and some restrictions on imports have also aided the policymakers’ objective of a narrower current account deficit. In 7MFY25, the country’s total export of goods and services amounted to $23.92 billion. Whereas, imports clocked in at $39.99 billion during the period, according to SBP data. The country’s worker remittances clocked in at $20.85 billion, an increase of nearly 32% compared to $15.83 billion in the same period last year. The current account is a key figure for cash-strapped Pakistan which relies heavily on imports to run its economy. A widening deficit puts pressure on the exchange rate and drains official foreign exchange reserves, while the situation reverses vice versa.