Pakistan posted a rare current account surplus of $121 million in January 2026, yet the headline improvement conceals a widening external imbalance driven by a sharply expanding trade deficit.

Data released by the State Bank of Pakistan showed the surplus marked a reversal from a $265 million shortfall in December 2025. However, the broader trend remains less reassuring. During the first seven months of fiscal year 2025-26, the external account registered a deficit of $1.074 billion, compared with a surplus of $564 million in the same period a year earlier.

The deterioration has been largely shaped by trade dynamics. The goods trade gap widened significantly to $18.402 billion during July-January FY26, up from $14.056 billion in the corresponding period last year. In January alone, the merchandise deficit stood at $2.591 billion, slightly narrower than December's $2.979 billion but higher than the $2.473 billion recorded a year earlier.

Services trade added further pressure. The services deficit reached $2.071 billion in the first seven months, compared with $1.821 billion previously. For January, the shortfall narrowed to $302 million from $401 million in December, though it remained above the $291 million level seen in January 2025.

Taken together, the combined goods and services gap expanded to $20.473 billion during July-January FY26, a notable increase from $15.877 billion in the same period last year. The monthly deficit for January stood at $2.893 billion, improving from $3.380 billion in December but still exceeding the $2.764 billion recorded a year earlier.

Other components offered partial relief. The primary income account posted a deficit of $5.333 billion, slightly lower than the $5.545 billion recorded in the previous year's comparable period. Meanwhile, secondary income-driven largely by remittances-provided a substantial cushion, with a surplus of $24.732 billion, up from $21.986 billion.

Remittance inflows remained robust, reaching $23.201 billion during the seven-month period, compared with $20.850 billion a year earlier. In January alone, overseas Pakistanis sent $3.465 billion, slightly below December's $3.592 billion but higher than $3.003 billion in January 2025.

The figures suggest that while short-term improvements in the current account are possible, Pakistan's external sector continues to rely heavily on remittances to offset a persistent and expanding trade imbalance.