Pakistan’s economy: remittances hit $10.9bn as imports outpace exports in first quarter

Pakistan’s economy ended the first quarter of the financial year with two stories running at the same time. Money coming into the country was strong. Money going out was growing even faster.

The Finance Division’s Monthly Economic Update and Outlook for October 2026, published on Thursday 29 October, covers July to September 2026, the first quarter of fiscal year 2026-27. Overseas Pakistanis sent home $10.9 billion, a $3 billion Eurobond sale went through, and foreign exchange reserves climbed to $26.8 billion.

But imports rose 14.3 percent to $17.8 billion, well ahead of exports. Inflation was still 10.3 percent in September, almost double the level a year earlier, and the State Bank raised its main interest rate to 12 percent on 27 October.

At a glance

What happened: Remittances rose 14 percent to $10.9 billion in July-September 2026, reserves reached $26.8 billion, and Pakistan recorded a $3.1 billion balance-of-payments surplus — but imports grew faster than exports and inflation stayed above 10 percent.

Why it matters: The economy is stabilising on the outside, with more dollars coming in and stronger reserves, while prices at home remain high and the government is paying far more interest on its debts.

What happens next: October inflation data will show whether prices kept cooling. The outlook depends on energy prices, the Middle East conflict, and whether exports catch up with imports.

The headline numbers

The first quarter covers July, August and September. The headline figures from the Finance Division’s October report are:

• Workers’ remittances rose 14 percent to $10.9 billion, up from $9.5 billion a year earlier.
• Goods exports grew 7.7 percent to $8.5 billion; goods imports grew 14.3 percent to $17.8 billion.
• The current account deficit widened to $874 million, from $755 million a year earlier.
• Foreign direct investment rose 19.9 percent to $719.7 million.
• Total liquid reserves stood at $26.8 billion on 16 October, including $21.5 billion held by the State Bank.
• Consumer price inflation averaged 10.2 percent over the quarter, against 4.3 percent a year earlier.
• The Federal Board of Revenue collected Rs3,086.2 billion in tax, up 7 percent and Rs33.2 billion above target.

Growth for 2025-26 was revised slightly down to 3.65 percent, from 3.70 percent. The Finance Division said the economy was consolidating stability, while warning that geopolitical tensions, volatile oil prices and high global inflation were the main risks.

Remittances did the heavy lifting

Workers’ remittances — the money overseas Pakistanis send home — have become the backbone of Pakistan’s external finances. They reached $10.9 billion in July-September 2026, up 14 percent on a year earlier, after a record $41.6 billion in 2025-26. September alone brought $3.6 billion, up 12.7 percent.

Compare that with exports: Pakistan sold $8.5 billion of goods abroad in the quarter, about $2.4 billion less than remittances. The Finance Division noted that remittances more than covered the combined deficit on goods and services trade, leaving the current account deficit relatively small at $874 million.

The Bureau of Emigration registered 43,062 workers for overseas jobs in September alone. But heavy reliance on remittances is a risk: they depend on jobs in the Gulf, Europe and North America, and much of the income comes from Gulf countries, where the Finance Division lists conflict and geopolitical tension among the main threats.

Imports grew faster than exports

Pakistan imported $17.8 billion of goods and exported only $8.5 billion, leaving a goods trade deficit of about $9.3 billion. Imports grew 14.3 percent, nearly twice as fast as exports at 7.7 percent. Machinery imports rose 19.3 percent, metals 24 percent and transport equipment 19.2 percent — partly a busier economy buying equipment, partly higher energy costs. September imports alone were $6.2 billion, up 22.7 percent on a year earlier.

Exports did improve: food exports rose 25.3 percent, led by rice, and textiles grew 5.3 percent. September exports rose 15.5 percent to $3 billion. But it was not enough to keep pace with imports.

The current account deficit — the broadest measure of Pakistan’s dealings with the rest of the world — was $874 million, about 15.8 percent wider than the $755 million a year earlier. The deficit is still small by recent standards; the whole of 2025-26 ended with a deficit of only $391 million. But the direction is the wrong way: if imports keep outpacing exports, pressure will build on reserves and the rupee.

Reserves and the return to global bond markets

Despite the wider current account deficit, the overall balance of payments was in surplus by $3.1 billion, against a deficit of $274 million a year earlier. The balance of payments counts borrowing and investment too, so it can be in surplus when enough money arrives through other channels.

That is what happened. Total foreign investment reached $3.65 billion, against a net outflow of $32.9 million a year earlier. The biggest factor was a $3 billion sovereign Eurobond issued in September — a bond sold to international investors in dollars. A successful sale signals that global investors are willing to lend to Pakistan again.

Portfolio investment recorded net inflows of $2.9 billion, against net outflows of $633.3 million a year earlier. Foreign direct investment rose about 20 percent to about $720 million, including $219.5 million in September.

Reserves rose to $26.8 billion on 16 October — $21.5 billion held by the State Bank and $5.3 billion by commercial banks. That is the strongest position in years, and a sharp change from three years ago, when reserves fell below $3 billion and Pakistan came close to default.

Inflation: lower than August, still double last year

Consumer price inflation was 10.3 percent in September, down from 11.1 percent in August, but well above the 5.8 percent of September 2025. Across the quarter, average inflation was 10.2 percent, against 4.3 percent a year earlier.

The Finance Division expects 9.5 to 10.5 percent inflation in October. That is a forecast, not a confirmed result — the official October figure had not been released when the report was published — but it suggests prices are cooling only slowly.

Transport prices rose 27.4 percent in September from a year earlier. Housing, water, electricity, gas and fuel costs rose 12.4 percent. Perishable food was up 11.8 percent and non-perishable food up 7.6 percent.

Part of the problem is global. Brent crude averaged $116.8 a barrel in September, up 28.4 percent from August, and the Food and Agriculture Organisation’s Food Price Index rose 1.5 percent to 136 points. Pakistan imports most of its oil and gas, so higher world energy prices feed quickly into fares, bills and the cost of moving goods. The weekly Sensitive Price Indicator rose 0.65 percent in the week ending 22 October, with 19 items up, 12 down and 20 unchanged. Better domestic crops may help moderate food inflation in the coming months, the Finance Division said.

The interest-rate response

On 26 October, the State Bank’s Monetary Policy Committee raised its key policy rate by 50 basis points to 12 percent, effective 27 October. The policy rate is what the central bank charges banks, and it sets the tone for borrowing costs across the economy.

The bank cited inflation risks from the intensifying Middle East conflict and high global energy prices. The aim was to anchor inflation expectations and contain second-round effects, in which one round of price rises leads to wage demands and further rises.

Higher rates make borrowing dearer, slowing spending and helping inflation — but they also hurt businesses needing credit and the government, whose interest payments rose 36.6 percent in July-August. Private-sector borrowing remained subdued, though the total stock of private credit was about 15 percent higher than a year earlier.

Taxes up, but the surplus shrank

Revenue is rising, but spending is rising faster. The Federal Board of Revenue collected Rs3,086.2 billion in July-September, up 7 percent and Rs33.2 billion above target. Sales tax grew 11.6 percent, excise duty 3.6 percent, customs duties 0.5 percent and direct taxes 5.5 percent.

But the fiscal surplus narrowed sharply. In July-August, it was Rs1,197.9 billion, or 0.8 percent of GDP, down from Rs2,123.8 billion, or 1.7 percent, a year earlier. The primary surplus, which excludes interest payments, fell to Rs2,311.2 billion, or 1.6 percent of GDP, from Rs2,938.9 billion, or 2.3 percent.

Total spending rose 20.7 percent, driven by a 69.5 percent surge in development spending. Subsidies were cut by 90 percent, so non-interest spending fell 8.1 percent — but interest payments rose 36.6 percent and swallowed much of the saving. The surplus survives, but the cushion is much thinner.

Factories and farms: a mixed picture

Large-scale manufacturing grew 1.9 percent in July-August, against 4.8 percent a year earlier. In August, output rose 0.7 percent year on year but fell 5 percent from July, with food, chemicals and pharmaceuticals weighing on the result.

Cars were a bright spot: truck and bus production rose 54.2 percent, cars 31.8 percent, and two- and three-wheelers 28.1 percent. Tractor production fell 15.3 percent, though tractor sales rose 37.8 percent to 4,109 units — dealers were apparently selling from existing stock.

Cement dispatches rose 3.9 percent to 13.1 million tonnes, with domestic dispatches up 7.8 percent to 10.8 million tonnes offsetting an 11.3 percent fall in exports to 2.3 million tonnes.

Agriculture did better. Maize output is estimated at 9.98 million tonnes, up 12.1 percent; sugarcane rose 8.8 percent to 97.3 million tonnes; rice was estimated at 10.2 million tonnes, up 1.8 percent. Cotton fell 4.8 percent to 6.71 million bales. Farm credit rose 32.7 percent to Rs540.5 billion in July-August, and the wheat support price was fixed at Rs4,500 per maund for Rabi 2026-27.

The KSE-100 fell 7,006 points in September to 169,969, and stood at 165,736 on 28 October, up 3.52 percent from a year earlier. But 15,440 new companies were registered in the quarter, up 37.3 percent.

What it means for households

The figures translate into everyday pressure. Transport up 27.4 percent in a year means dearer fares and fuel. Housing and energy up 12.4 percent means bigger electricity and gas bills. Food up 7.6 to 11.8 percent means the weekly shop costs more for the same basket.

There was some support for vulnerable households: the Pakistan Poverty Alleviation Fund disbursed 5,782 interest-free loans worth Rs430 million in September, with cumulative disbursements since 2019 reaching Rs127.48 billion.

The economy is in a better place than two or three years ago, when reserves were nearly empty and default was a real fear. But the recovery is not yet reaching households as lower prices. Inflation is still in double digits, rates have risen, and the government is spending heavily on interest. Until exports grow faster and inflation falls, the recovery will feel fragile.

The risks ahead

The Finance Division named geopolitical tensions, recurring Gulf conflict, volatile oil prices, trade disruptions and elevated global inflation as the main downside risks. The International Monetary Fund’s October World Economic Outlook projects global growth of 3.1 percent in 2026 and 3.4 percent in 2027, with global inflation of 4.7 percent in 2026 easing to 4.1 percent in 2027.

For Pakistan, four things matter most: whether exports close the gap with imports, especially textiles and rice; whether October and November inflation confirms prices are cooling towards single digits; whether remittances keep growing; and whether the government can control its finances while interest payments rise. Farm output, reserves, remittances and foreign financing should support activity, the report said, but tax administration, energy efficiency and state-owned enterprise reform will be critical.

Frequently asked questions

What is the current account deficit, and why does it matter?

The current account is the broadest measure of Pakistan’s dealings with the rest of the world, covering trade, investment income and transfers such as remittances. A deficit means Pakistan spent more abroad than it earned. In July-September 2026 it was $874 million, wider than $755 million a year earlier, because imports grew faster than exports.

How much did overseas Pakistanis send home in the first quarter?

$10.9 billion in July-September 2026, up 14 percent from $9.5 billion a year earlier. September alone brought $3.6 billion, up 12.7 percent. Remittances were larger than the $8.5 billion earned from goods exports in the same period.

Why did Pakistan’s foreign exchange reserves rise if the current account was in deficit?

Other money came in through the financial account: a $3 billion Eurobond, $2.9 billion of net portfolio inflows and about $720 million of foreign direct investment. Together they produced a $3.1 billion balance-of-payments surplus, lifting total liquid reserves to $26.8 billion on 16 October.

What is Pakistan’s inflation rate now?

10.3 percent in September 2026, down from 11.1 percent in August but up from 5.8 percent in September 2025. The July-September average was 10.2 percent, against 4.3 percent a year earlier. The Finance Division forecasts 9.5 to 10.5 percent for October, but the official figure had not been released when the report was published.

Why did the State Bank raise interest rates to 12 percent?

The Monetary Policy Committee raised the policy rate by 50 basis points to 12 percent, effective 27 October, citing inflation risks from the Middle East conflict and high energy prices. The aim is to anchor inflation expectations, even though higher rates make borrowing dearer for businesses and households.

Is Pakistan’s economy recovering?

Partly. Reserves are stronger, remittances are at record levels, tax collection beat its target and foreign investors have returned. But inflation is still in double digits, imports are outpacing exports, manufacturing growth has slowed, and the fiscal surplus narrowed as interest payments rose 36.6 percent. The recovery is real, but not yet secure.

Conclusion

Pakistan’s first-quarter report tells a story of an economy that has steadied itself without yet solving its hardest problems. Outside, it looks much healthier: $10.9 billion in remittances, $26.8 billion in reserves, a return to bond markets and a $3.1 billion balance-of-payments surplus.

Inside, it is tougher: prices rising over 10 percent a year, transport up more than a quarter, interest rates at 12 percent, and the government paying far more to service its debts. Factories are growing more slowly and the trade gap is widening.

Whether this becomes a lasting recovery or another short-lived stabilisation depends on oil prices, exports, inflation and remittances. For now, the numbers offer cautious hope — and plenty of reason to watch the price of everyday life.

This article is for general information and education only. It is not legal or financial advice.

Sources

• https://mettisglobal.news/Inflation-projected-at-105-in-October-FY27-64653 (Mettis Global, 29 October 2026)
• https://pakistanstoday.com.pk/business/pakistans-remittances-rise-14-to-10-9-billion-in-first-quarter/ (Pakistan Today, 29 October 2026)
• https://bloompakistan.com/inflation-remains-in-high-trajectory-of-9-5-10-5pc-in-oct-finance-ministry/ (Bloom Pakistan, 30 October 2026)