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Home » From Cash Cushion to Growth Catalyst: Rethinking Pakistan’s Remittance Boom
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From Cash Cushion to Growth Catalyst: Rethinking Pakistan’s Remittance Boom

By Yasher RizwanAugust 11, 2025No Comments3 Mins Read2 Views
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Pakistan kicked off FY26 with a solid boost from overseas workers, as remittance inflows in July 2025 reached $3.21 billion — a 7.4% increase year-on-year. However, this was slightly lower than June’s $3.4 billion, reflecting the usual seasonal slowdown after the end-of-fiscal surge.

The momentum builds on an exceptional FY25, when remittances hit a record $38.3 billion, marking a 27% jump from the previous year — a figure that even surpassed Pakistan’s total export earnings.

Key Contributors to July’s Inflows

According to State Bank of Pakistan (SBP) data:

  • Saudi Arabia led with $823.7 million
  • United Arab Emirates (UAE) followed with $665.2 million, including $456.8 million from Dubai
  • United Kingdom sent $450.4 million
  • European Union contributed $424.4 million
  • United States provided $269.6 million
  • Other GCC nations (Qatar, Oman, Kuwait) added $296 million

This distribution highlights Pakistan’s strong reliance on Gulf-based workers, while also showing steady inflows from Europe and North America — thanks to a growing base of professionals, freelancers, and students alongside traditional labour migrants.

Why Inflows Have Strengthened

Several trends have supported this upward trajectory:

  • Crackdown on hundi/hawala channels has pushed more transfers into official banking systems
  • A competitive exchange rate has reduced incentives for informal transfers
  • Rising freelance income and remote work for global companies have added a new, stable inflow source
  • Gulf states’ tightening of work visas has been partly offset by professional remittances from non-traditional sectors

The Double-Edged Sword of Remittance Reliance

While remittances are critical for foreign exchange reserves and current account stability, over-reliance carries risks. Economic shocks in host countries, fluctuating oil prices, and policy changes abroad could quickly disrupt these inflows.

Economists also warn of a “Dutch Disease” effect — where dependence on remittances draws labour into low-productivity jobs, fuels imports, and delays the structural reforms needed for export competitiveness. Seasonal spikes during Eid or at the start of the fiscal year can also mask underlying volatility.

Turning Short-Term Gains into Long-Term Resilience

To secure lasting benefits, Pakistan must treat this remittance boom as a strategic opportunity — not a permanent safety net.

While sustaining the crackdown on informal transfer systems is essential, the real game-changer lies in channeling these funds into productive sectors:

  • Boosting value-added manufacturing
  • Investing in skills development
  • Expanding integration into global supply chains

July’s performance offers optimism, but the ultimate measure of success will be whether Pakistan can convert overseas earnings into sustainable economic growth — reducing vulnerability to external shocks and building true financial resilience.

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