Remittances surge 33.6pc to $14.8bn in 5 months

KARACHI: Pakistan’s remittances from its overseas workers jumped to $14.8 billion in the five months of the fiscal year 2025, a 33.6 percent increase from a year earlier, the central bank data showed on Monday.

The growth in remittance inflows can be attributed to the country’s economic recovery supported by loans from the International Monetary Fund (IMF), a stable local currency, incentives provided to banks and money exchangers, and the increasing emigration of skilled Pakistani workers. One million skilled professionals are said to have left Pakistan over the last three years.

In November, money sent back home by Pakistani migrants rose by 29.1 percent year-on-year, totaling $2.9 billion. However, these inflows decreased by five percent month-on-month. Remittances have averaged $2.9 billion per month so far.

The primary factors contributing to the rise in official remittance flows include reforms that have reduced illicit foreign exchange trading and the incentives introduced by the State Bank of Pakistan. Additionally, Pakistani migrants are remitting more money into Pakistan as a result of declining inflation worldwide.

“On a year-on-year basis, remittances continue to record a healthy rise, driven by stable rupee parity, contained hawala and hundi activity, and incentives for banks and money exchangers,” said Awais Ashraf, the director research at AKD Securities Limited.

“Additionally, increased emigration over the past two years has played a significant role in maintaining remittance inflows at around USD 3 billion. Stable inflows from the UAE also reflect strict foreign exchange controls at the country’s exit points,” Ashraf added.

“In the past eight years, there has been only one instance of remittances increasing sequentially in November. This occurred in November 2020, when remittances rose by 2.4 percent month-on-month, driven by a sustained recovery following a sharp decline in inflows during August 2020,” Ashraf noted.

Remittances from the diaspora are a crucial source of external financing for Pakistan. They help enhance foreign exchange reserves and support the balance of payments. During the first four months of the fiscal year 2025, the current account recorded a surplus of $218 million, a significant improvement compared to a deficit of $1.528 billion in the same period the previous year. As of November, the foreign exchange reserves held by the State Bank of Pakistan (SBP) stood at $12 billion—sufficient to cover more than two months of imports.

Both the central bank and the government expect remittances to hit a record $35 billion in FY25. However, analysts worry about the political uncertainty that still exists while weighing the economic effects if the Pakistan Tehreek-e-Insaf (PTI) starts a civil disobedience campaign and asks Pakistanis living abroad to curtail their remittances to their home country.

Remittances, which generate over $30 billion a year, may decline as a result of these calls, according to some analysts, since they may persuade people to utilise unofficial channels like hawala rather than official banking systems.

Ibrahim Amin, a banking and financial analyst, said political instability and calls for civil disobedience can erode confidence among expatriates, potentially leading to a decline in remittance inflows. Historical data indicates that during periods of political unrest, remittances have shown resilience; however, prolonged instability may alter this trend.

Such disruptions can derail economic plans, especially those tied to international commitments like the IMF programmes. Therefore, maintaining political stability is crucial for the successful implementation of economic strategies and sustaining confidence among overseas Pakistanis contributing through remittances, he added.

However, since people send this money to support their families and some of these flows are freelancing earnings, some analysts do not think that possible civil disobedience will have a big influence on remittance flows.

Meanwhile, Prime Minister Shehbaz Sharif congratulated the nation on the record increase in remittances. In his statement, the prime minister said he was grateful to overseas Pakistanis for sending remittances worth $2.9 billion in November.

The 29 percent increase in remittances in November 2024 over the previous year reflects the confidence of overseas Pakistanis in the government’s policies. The prime minister said that in the first five months of the current financial year, remittances have increased by 33.6 percent to $14.8 billion compared to last year, which is welcome and will bring good results for the economy. He said that by the Grace of Allah, the efforts of the government economic team are bringing good results.

The credit for investment in Pakistan from abroad, a big reduction in the inflation rate, economic stability goes to the government team. “Overseas Pakistanis are our pride and the ambassadors of Pakistan. Resolving the problems of overseas Pakistanis is the top priority of the government. Overseas Pakistanis are our valuable assets who are shining Pakistan’s name with their skills all over the world,” he said.