KARACHI: The current account changed its track from deficit to surplus in September and foreign direct investment (FDI) plunged 34 per cent year-on-year during the first quarter of FY26, according to the State Bank of Pakistan (SBP) on Monday.

The SBP reported that the current account posted a surplus of $110 million in September against the deficits in July and August. This came as a surprise to many, who had predicted more deficits in the coming months.

The Sept result was much better than the same month of the previous fiscal year — FY25 — when the current account posted a deficit of $52m.

However, the fiscal year FY25 had ended with a surplus of $1.932 billion, which was a pleasure for the government struggling for more dollars. The deficit in FY25 turned positive with the record inflows of $38bn in remittances. It supported both the exchange rate stability and foreign exchange reserves of the central bank.

Foreign direct investment tumbles by 34pc in first quarter of FY26

The SBP governor recently said the central bank purchased $20bn from the interbank currency market in the last three years to improve its reserves and make external payments.

The FY26 started with $379m current account deficit (CAD) in July which declined to $245m in August.

The July-Aug FY26 witnessed a cumulative CAD of $624m compared to $430m in the same period of the last fiscal year. However, the first quarter of FY26 — July-September — witnessed a cumulative CAD of $594m against $502m in the same quarter the preceding year.

The data show that the exports slightly improved in the first quarter to $7.9bn compared to $7.4bn.

Similarly, the imports increased by $1.2bn to $15.438bn against $14.255bn.

The export of services slightly increased to $2.2bn while the import of services increased to $3.2bn.

According to Pakistan Bureau of Statistics data for the July-Sept period in FY26, the trade deficit stood at $9.37bn, up from $7.05bn in the same period last year.

Food inflation fears

It is believed the country would need additional dollars to import food items like wheat, sugar and others because of the recent devastating floods to maintain a balance and stop the expected hike in food prices that might increase inflation.

However, it requires more dollars which means the trade deficit could widen in the coming months.

In any case, the country succeeded in maintaining the exchange rate which supported the inflows particularly through the remittances.

The remittances during the first three months remained over $3bn indicating that current fiscal year would be able to receive at least the amount it had received in FY25 — $38bn.

Decline in FDI

According to the SBP data, FDI fell to $568.8m during the first quarter FY26 while it stood at $864.6m in the same period of last fiscal year — showing a 34pc decline this year.

The government has been struggling for the last three years to increase the inflows but foreign investors have not found Pakistan a suitable country to invest in.

The highest inflow was noted from China that fell sharply this year compared to the previous fiscal year.

The first quarter inflow from China was $188m compared to $502.6m in the same period of last fiscal year.

It was difficult for analysts to find the actual reason for this massive drop in FDI from China but some of them were sure that it would improve in the coming months.

Other significant inflows were $96m from Hong Kong, $55m from Switzerland, $50m from the UAE and $53m from the UK.

Published in Dawn, October 21st, 2025