Pakistan Achieves First Current Account Surplus in 14 Years

The Diplomat

28-07-2025

Pakistan's economy continues to demonstrate signs of stabilization and, in some cases, has even surpassed foreign currency reserves-related financial targets agreed with international lenders, particularly the International Monetary Fund (IMF).
The State Bank of Pakistan announced last week that the country had achieved its first annual current account surplus (at $2.1 billion) after 14 years. The milestone was reportedly reached with crucial import management, a major rise in remittances, and growth in exports, particularly in the textile and information technology sectors.
As a result of these factors, including fresh and rollover loans, Pakistan's foreign exchange reserves have reached $20 billion.
Pakistan's Prime Minister Shehbaz Sharif welcomed the achievement, saying that the main reason for the current account surplus was due to 'a significant increase in remittances and exports.' Government officials are highlighting this development as a major indication that the country's economy has stabilized.
'Improving financial and economic indicators show that the country's economy is on the path of stability,' Sharif said.
In another significant development, ratings agency S&P Global raised Pakistan's sovereign credit rating to B- from CCC+ and placed it on a 'stable' outlook. 'The stable outlook reflects our expectations that continued economic recovery and government efforts to enhance revenue will stabilize fiscal and debt metrics,' S&P said in a statement. 'We also expect that sustained official financing will support Pakistan in meeting its external obligations, and that the country will continue to roll over its commercial credit lines over the next 12 months,' it said.
Amid these developments, Pakistan is also pushing to normalize and ease trade terms with Afghanistan. Pakistan and Afghanistan signed a deal to reduce tariffs on eight agricultural items for one year, which has laid the foundation for a broader preferential trade agreement (PTA) between the two countries. The agreement, which will come into effect on August 1, will remain in place for one year and can be renewed by the two countries. The deal also allows for the future inclusion of additional items. The temporary agreement is being seen as the first tangible step toward launching negotiations on a comprehensive PTA.
Seemingly, these positive developments on the monetary front are supported by growing international backing for Pakistan. Pakistan's Army Chief Lt. Gen. Asim Munir recently visited China, where he met top military and civilian leaders to discuss initiatives under the China-Pakistan Economic Corridor (CPEC) and the need for both countries to develop coordinated responses to shared geopolitical challenges.
While the army chief was in China, Pakistan's Foreign Minister and Deputy Prime Minister Ishaq Dar was in Washington for his first bilateral meeting with Secretary of State Marco Rubio. The two discussed trade and diplomatic ties. The statement issued by the secretary of state after his meeting with Dar was unusually warm and went beyond the typical mention of counterterrorism cooperation alone.
'Secretary Rubio expressed appreciation for Pakistan's continued willingness to play a constructive role in mediating conversations with Iran and its commitment to preserving regional stability,' the State Department said.
In a separate post on X, Rubio said he met his Pakistani counterpart to discuss 'expanding bilateral trade and enhancing collaboration in the critical minerals sector.'
Rubio also thanked Dar for 'Pakistan's partnership in countering terrorism and preserving regional stability.'
Pakistan seems to be doing well in managing its relationships with both China and the U.S., which bodes well for its economy and its ability to access international markets.
That said, critics argue that economic stabilization doesn't mean Pakistan's economy is on the path to sustainable growth. The ongoing stabilization is mainly seen as Pakistan doing well in meeting targets agreed with international lenders and fulfilling its debt obligations. Moreover, Pakistan continues to spend more on importing goods and services compared to what it earns from exports.
Pakistan has around $20 billion in foreign currency reserves, but the dollar rate in the interbank and open markets has increased in recent weeks. The Pakistani English daily Dawn reported that private businesses are finding it difficult to access dollars easily in the market as the State Bank of Pakistan makes major purchases to meet fiscal deficit-related gaps. Last week, the dollar rate dropped a little after security agencies launched a crackdown on illegal currency smugglers. It appears there are still concerns about dollar-related liquidity issues despite the more-than-expected rise in foreign currency reserves in recent months.
Business owners from across the country recently met with Munir to share their concerns about the need for effective reforms, especially regarding taxation, to steer the economy back onto a sustainable path to recovery.
It seems that domestic reforms are still slow, even though overall macroeconomic indicators have improved. Inflation has dropped significantly in recent months officially, but retail markets and major food-related businesses have yet to pass these benefits on to consumers. This remains a challenge that the government has not yet overcome with adequate reforms, which will require sidelining interest groups.
However, Pakistan has come a long way from being on the verge of economic default not long ago. The real challenge is to build on this internationally recognized economic stabilization by pushing through meaningful reforms.