- Stable flows from the UAE “reflect” strict exchange controls.
- The SBP and the government expect remittances to reach a record high of $35 billion in FY25.
- During political unrest, remittances have demonstrated resilience.
KARACHI: Data from the State Bank of Pakistan (SBP) on Monday revealed that remittances to Pakistan from its foreign citizens jumped to $14.8 billion in the first five months of the financial year 2024- 25, a massive gain of 33.6% from the previous year. News reported.
National economic recovery aided by loans from the International Monetary Fund (IMF), a stable local currency, incentives provided by exchange houses and banks as well as increased emigration of skilled Pakistani workers have contributed to the growth of the inflow of funds. According to the data, nearly a million skilled workers have gone abroad in the past three years.
Overseas Pakistanis sent around $2.9 billion in November, an increase of 29.1% year-on-year. However, these remittances declined by 5% month-on-month. Monetary inflows still average $2.9 billion per month.
The incentives and policies of the State Bank of Pakistan to reduce illegal foreign exchange trading are the main causes of the increase in official remittance flows. Additionally, as global inflation falls, Pakistani migrants are sending more money home.
“Year-on-year, remittances continue to record a strong increase, driven by a stable rupee parity, subdued hawala and hundi activity and incentives for banks and money exchangers. money,” said Awais Ashraf, head of research at AKD Securities Limited. .
“In addition, increased emigration over the past two years has played a significant role in keeping remittances at around $3 billion. Stable flows from the UAE also reflect strict exchange controls at exit points from the country.
“In the last eight years, there has been only one instance of a sequential increase in remittances in November. This happened in November 2020, when remittances increased by 2.4% month-on-month, thanks to a sustainable recovery after a sharp decline in flows in August 2020,” Achraf noted.
Diaspora remittances constitute a crucial source of external financing for Pakistan. They help to increase foreign exchange reserves and support the balance of payments. During the first four months of fiscal 2025, the current account recorded a surplus of $218 million, a significant improvement from the deficit of $1.528 billion during the same period of the previous year. In November, foreign exchange reserves held by the central bank stood at $12 billion, enough to cover more than two months of imports.
The SBP and the government expect remittances to reach a record high of $35 billion in FY25. However, analysts are concerned about the political uncertainty that still exists and assess the economic consequences if the Pakistan Tehreek-e-Insaf (PTI) launches a civil disobedience campaign and asks Pakistanis living abroad to reduce their remittances to their home countries.
Some analysts say remittances, which generate more than $30 billion a year, could decline as a result of these appeals because they could persuade people to use unofficial channels like hawala rather than banking systems. officials.
Ibrahim Amin, a banking and financial analyst, said political instability and calls for civil disobedience can erode expatriate confidence, potentially leading to a decline in remittances. Historical data indicates that during periods of political unrest, remittances have demonstrated resilience; however, prolonged instability could change this trend.
Such disruptions can derail economic plans, especially those linked to international commitments like IMF programs. Therefore, maintaining political stability is crucial for the successful implementation of economic strategies and maintaining confidence among overseas Pakistanis who contribute through remittances, he added .
However, given that people send this money to support their families and that some of these flows are independent income, some analysts do not believe that possible civil disobedience will have much influence on remittance flows .