Pakistan's external accounts have begun the new fiscal year in better shape than they ended the last. The current-account deficit shrank to $328m in July 2026, down from $814m in June and $529m in the same month a year earlier, according to data released on Tuesday by the State Bank of Pakistan (SBP). The improvement was driven largely by a jump in exports, which reached their highest monthly level in 19 months.

Goods exports climbed to $3bn in July, a rise of 17% from June and 9% from a year earlier. The surge in overseas sales did most of the work in narrowing the gap, since the other side of the ledger barely moved. Imports held broadly steady at around $6.2bn, little changed from the previous month. With purchases from abroad flat and exports rising, the shortfall on the current account contracted sharply.

Topline Research, a brokerage, noted that although the current account remained in the red, the deficit had narrowed considerably compared with both June and July of last year. The monthly figures thus offer a measure of relief after a weak close to the previous fiscal year.

The broader trend, however, is less reassuring. For the 2025-26 fiscal year as a whole, Pakistan recorded a current-account deficit of $139m, a marked reversal from a surplus of $1.84bn in 2024-25. The swing of nearly $2bn reflects a significant deterioration in the country's external position.

That slide occurred despite record-high remittances from workers abroad. Strong demand for imports outstripped exports, which managed only limited growth over the year, and money sent home by the diaspora was not enough to keep the balance in surplus.

July's figures therefore mark an encouraging start rather than a turning point. Exports have shown that they can rise, but imports remain stubbornly large at roughly double their value. Sustaining a narrower deficit will depend on whether the export gains of July can be repeated in the months ahead.