By Staff Reporter
KARACHI: Remittances from Pakistan’s overseas workers rose 9% to a record $41.6 billion in the fiscal year through June, absorbing a sharply wider trade deficit and giving the central bank room to consider easing policy even as analysts warn that unrest in the Middle East could crimp the flows that have become the linchpin of the country’s external accounts.
The State Bank of Pakistan said Thursday that remittances totalled $3.475 billion in June, up 2% from a year earlier but down 18% from May, when inflows hit an all-time monthly high of $4.3 billion ahead of Eid al-Adha. The full-year total compares with $38.3 billion in the previous fiscal year.
The scale of the increase has turned remittances into the primary shock absorber for an economy still working through the aftermath of a 2023 balance-of-payments crisis. Pakistan’s trade deficit widened 21.6% from a year earlier to $39.5 billion in the fiscal year, according to Saad Hanif, head of research at Ismail Iqbal Securities, who said remittance inflows fully absorbed that gap and kept the current account in surplus.
Hanif said the buffer helped push the central bank’s foreign-currency reserves to $18.4 billion from $13 billion a year earlier, despite heavy external debt repayments — a build he said has supported the rupee and created scope for eventual interest-rate cuts.
Waqas Ghani, head of research at JS Global Capital, said remittances remain the cornerstone of the external account as trade pressures mount, pointing to the same combination of higher overseas employment, continued migration toward formal banking channels and stable exchange-rate dynamics that has underpinned inflows through the year.
Analysts attributed the annual gain to a mix of structural and policy shifts rather than any single driver. Hanif cited the continued move from informal to formal channels following exchange-company reforms and a crackdown on hawala and hundi networks, together with a rupee that has held stable near 278 to the dollar — removing the incentive to delay or divert transfers through unofficial routes — and a larger pool of remitters following two years of elevated emigration to Gulf Cooperation Council states. He said the breadth of the growth showed up across corridors, with inflows from the UAE, the European Union and other regions all posting double-digit annual gains even before incentive schemes are factored in.
Sana Tawfik, head of research at Arif Habib Limited, pointed to a similar set of forces: exchange-rate stability, a narrowed gap between interbank and open-market rates, and administrative action against illegal money-transfer channels that pushed more flows into formal banking. She said the rising number of Pakistanis taking jobs abroad has also lifted inflows.
Saudi Arabia remained the largest single source of remittances in June, with overseas Pakistanis sending $830 million, up 1% from $823 million a year earlier but down 19% from May’s $1.025 billion. The UAE followed at $792 million, a 10% annual increase from $717 million, though inflows fell 21% from May. Britain contributed $515 million, down 20% from May’s $645 million, while the U.S. sent $297 million, a 15% monthly decline from $349 million. Remittances from European Union countries totalled $415 million, down 11% from May’s $466 million.
SBP Governor Jameel Ahmad had signalled the strength of the full-year number ahead of Thursday’s release, saying preliminary data pointed to inflows finishing above $41.5 billion despite recent geopolitical tension in the Middle East. Hanif said the central bank is projecting remittances to reach $44 billion in the new fiscal year, though he flagged two variables to watch: the effect of the Gulf conflict on labour markets across the GCC, where the bulk of Pakistan’s overseas workforce is concentrated, and the withdrawal of remittance incentive programs.
The SBP moved last week to unwind two of those programs. The central bank discontinued the Telegraphic Transfer Charges Incentive Scheme, which had reimbursed banks for waiving fees on telegraphic transfers, and separately ended the Sohni Dharti Remittance Program, which had rewarded overseas Pakistanis with points for sending money through formal banking channels. Banks and exchange companies have been told to continue processing eligible remittances free of charge even without the reimbursements, absorbing the cost themselves, while points already earned under the Sohni Dharti program can still be redeemed until June 2027.
Remittances have become an outsize support for household spending as well as the broader economy, supplementing disposable income for remittance-dependent families and helping stimulate economic activity even as export growth has lagged.
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