BoP swings to $4.39b deficit

Portfolio investment records $2.93b net inflow against $631m outflow last year Foreign direct investment (FDI) in Pakistan increased to $720 million during the first quarter, up 20% from $600 million in the same period last year. However, monthly FDI inflows slowed to $219 million in September from $322 million in August. Photo: file The overall balance of payments (BoP) swung to a deficit of $4.39 billion in September, compared with $118 million in August, as the current account deficit widened to $356 million from $73 million, according to State Bank of Pakistan (SBP) data. For July-September, the BoP recorded a deficit of $3.12 billion, against a surplus of $274 million in the corresponding period last year. The figures highlight the growing gap between Pakistan's foreign exchange earnings and payments, with the merchandise trade deficit remaining the largest component of the goods and services trade imbalance. Pakistan's goods trade deficit widened 21.1% to $9.33 billion in the first quarter of fiscal year 2026-27 as imports grew nearly twice as fast as exports, highlighting mounting pressure on the external account despite a recovery in merchandise exports in September. Goods imports increased 14.3% to $17.78 billion during July-September, compared with $15.56 billion in the same period last year. Goods exports rose 7.7% to $8.45 billion from $7.85 billion. The widening trade gap contributed to a deterioration in the current account, which recorded a deficit of $874 million during the first quarter, compared with $755 million a year earlier. Goods exports increased 15.5% year-on-year to $3.02 billion in September, reversing a 1.5% decline recorded in August. However, imports grew faster, rising 22.7% to $6.17 billion from $5.03 billion a year earlier. Consequently, the monthly goods trade deficit widened to $3.16 billion in September from $2.42 billion a year earlier. The contrasting growth rates suggest the recovery in exports has yet to keep pace with the expansion in import payments. Pakistan's services exports increased 22.8% to $2.72 billion in the first quarter, compared with $2.21 billion a year earlier. Telecommunications, computer and information services remained a major contributor, generating $1.25 billion during July-September, up from $1.06 billion in the same period last year. Other business services exports rose to $622 million from $486 million, while travel services exports increased to $322 million from $157 million. Services imports, however, also increased to $3.55 billion from $3.05 billion. The resulting services trade deficit narrowed slightly to $831 million from $840 million a year earlier. Remittances remain a key support Workers' remittances rose 14% to $10.88 billion during the first quarter, compared with $9.54 billion in the corresponding period last year, providing an important source of foreign exchange. However, monthly remittances declined to $3.59 billion in September from $3.66 billion in August, a decrease of around 1.9%. The secondary income balance, which includes remittances and other current transfers, reached $11.61 billion during July-September, compared with $10.06 billion a year earlier. Despite these inflows, the current account remained in deficit as the combined goods, services and primary income balance deteriorated. Pakistan's primary income deficit widened slightly to $2.32 billion during the first quarter from $2.27 billion a year earlier. Primary income payments reached $2.56 billion, compared with credits of $244 million, reflecting the continued imbalance between income paid abroad and income received from overseas. The primary income account includes cross-border income flows such as investment income and compensation of employees. Monthly FDI slows Foreign direct investment (FDI) inflows into Pakistan increased to $720 million during the first quarter, up 20% from $600 million in the same period last year. However, monthly FDI inflows slowed to $219 million in September from $322 million in August. Portfolio investment recorded a net inflow of approximately $2.93 billion into Pakistan during July-September, compared with a net outflow of $631 million a year earlier. The September figure included a $2.87 billion net portfolio inflow, largely reflected in debt securities. Despite these investment flows, the financial account recorded a net outflow of $4.16 billion during the first quarter, compared with $726 million in the corresponding period last year. The SBP's balance of payments table reported gross foreign exchange reserves, including cash foreign currency holdings and excluding unsettled claims on the Reserve Bank of India, at $22.88 billion in September, compared with $18.49 billion in August. The central bank's reserve-assets measure recorded an increase of $4.38 billion in September, while the overall balance of payments showed a deficit of $4.39 billion. Furthermore, the Pakistani rupee edged up Rs0.01 against the US dollar on Friday, closing at 276.91 in the inter-bank market, compared with 276.92 on Thursday. Internationally, the dollar was heading for its first weekly decline in five weeks as concerns over artificial intelligence investment and falling US yields lifted the euro from a 17-month low. Meanwhile, gold prices in Pakistan rose by Rs2,800 per tola on Friday to reach Rs440,636, tracking gains in the international market, according to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA). The price of 10-gramme gold increased by Rs2,401 to Rs377,774. On Thursday, gold had remained unchanged at Rs437,836 per tola. In the international market, gold gained $28 to reach $4,181 per ounce. Meanwhile, silver prices climbed by Rs108 to a record high of Rs6,256 per tola.