ECONOMIC GROWTH
Money sent back home by overseas Pakistanis plays a major role in sustaining millions of households across the country. These remittances are often the primary source of income for families, enabling them to meet their everyday expenses such as food, clothing and utility bills. They also provide support for the long-term needs, costs that many families would struggle to afford otherwise.
Beyond basic necessities, remittances often help families improve their standard of living by allowing them to repair or build homes, invest in small businesses or purchase household appliances. In rural areas especially, such financial support can make the difference between extreme poverty and a modestly comfortable life. For many households, this steady flow of funds ensures financial stability, protects them during economic shocks and offers a sense of security that they would not have had without the support of their relatives working abroad.
In short, remittances are a lifeline that uplifts families, strengthens communities and contributes significantly to the national economy.
On a wider scale, remittances bring in foreign exchange, which strengthens the financial system and provides stability. At the national level, these inflows help narrow the trade deficit, ease pressure on the Pakistani rupee and give the government the resources to purchase essential goods from abroad, such as fuel, food and medicines.
In FY2024-25, Pakistan received a record $38.3 billion in remittances, an increase of approximately 26.6 percent, compared with $30.3 billion the previous year. This amount was even higher than what Pakistan received from the IMF loan programme. In June 2025 alone, remittances reached $3.4 billion, up from $3.1 billion in June 2024. The main contributors were Saudi Arabia ($9.34 billion), the UAE ($7.83 billion), the UK ($5.99 billion) and the US ($3.72 billion). In August 2025, remittances were $3.1 billion, with the total inflows for July-August reaching $6.4 billion.
Pakistan’s economy has been fragile for years. Weak economic structures, political instability, energy shortages and inconsistent policies have all added to the problems. The country spends more foreign currency on imports than it earns from exports, leaving the balance of payments in deficit. To cover this gap, Pakistan depends on foreign exchange through exports, investments, loans, and remittances. Of these, remittances are the most stable. Unlike loans, which must be repaid with interest, or investments, which rely on political stability and investor confidence, remittances are more reliable. Families depend on them, and so does the government. In comparison, foreign direct investment (FDI) remains very low.
Every year, overseas Pakistanis send billions of dollars back home. These inflows make up a big share of the country’s foreign exchange earnings. In many years, remittances have been higher than foreign investment and even higher than export earnings. During times of crisis, remittances fill the gap. Without them, the State Bank of Pakistan’s reserves would fall to dangerous levels and the rupee would lose even more value. In 2024-25, remittances even brought the current account into surplus, giving some relief to the economy.
Remittances also have a direct impact on the lives of the people. Money sent from abroad helps families pay for food, housing, healthcare and education. This money circulates in the local economy--- when homes are built, construction workers and suppliers get jobs; when children go to school, the education sector benefits; when families shop, local markets thrive. In this way, remittances reduce poverty and indirectly create jobs. Given that Pakistan’s GDP growth in 2024-25 was modest, remittances played a major role in keeping household spending and local demand alive.
Remittances cushion the economy in difficult times and give the government space to manage trade deficits and currency pressure. But they should not be seen as a permanent substitute for sound economic policies
The government of Pakistan recognises the importance of remittances and has made efforts to improve the process. Banks and money transfer services are encouraged to provide fast, secure and low-cost ways of sending money. Using proper banking channels is important because if people use informal systems like hundi or hawala, money does not enter the official economy. Digital technology, especially mobile banking and apps, has made the process easier and more secure. Programmes like the Roshan Digital Account have attracted billions from expatriates, linking remittances with savings, property investment and national bonds.
During crises, remittances have proven especially valuable. When Covid-19 hit, many feared that overseas workers would lose jobs and remittances would fall. Although some workers were affected, the overall remittances to Pakistan actually rose. Families abroad reduced their own expenses to keep sending money home. Later, in 2024-25, when inflation was high, remittances again helped by strengthening reserves and stabilising the economy.
Strong remittance inflows also reduce the need for Pakistan to borrow heavily from international lenders such as the IMF or foreign banks. Loans come with strict conditions and add to debt. But when remittances are high, they provide a cushion, giving the government more breathing space. For example, in 2024-25, strong remittance figures helped Pakistan borrow less from abroad.
However, remittances are not a long-term solution to the economic problems. The country cannot rely only on money sent from abroad, while avoiding necessary reforms at home. If labour demand falls in the Gulf, if immigration rules tighten in Europe or the US or if Gulf economies slow down, remittances could drop. That is why Pakistan must use this money wisely. Some of it should be invested in projects that create long-term growth rather than being spent only on daily needs.
Another challenge is that regular remittances can sometimes make families dependent. If they rely too much on money from abroad, they may lose the incentive to earn locally. The government can help by creating policies that encourage families to invest remittance money in small businesses, housing, or savings instruments that contribute to the economy. If more remittance money is invested productively, it could help boost Pakistan’s growth.
Overseas Pakistanis are also showing interest in investing through special government schemes. Initiatives like the Roshan Digital Account allow them to open bank accounts, invest in bonds, or buy property from abroad. These schemes not only support families but also contribute to the wider economy. If managed properly, they can increase trust in the financial system and attract even more funds.
Besides the financial side, remittances also play social and cultural roles. They keep families connected across continents and give children better opportunities for education and health. Many families have been lifted out of poverty because of the sacrifices of their loved ones working abroad. Their contribution is not just financial - it is emotional and social too.
Looking ahead, remittances will continue to be important for Pakistan’s stability. But the real challenge for policymakers is to use them effectively. Strong inflows give an opportunity to reduce borrowing, stabilise the rupee and invest in development. At the same time, Pakistan must build strong exports, attract sustainable investment, and improve governance. Only then will remittances become a foundation for growth instead of temporary support.
Remittances cushion the economy in difficult times and give the government space to manage trade deficits and currency pressure. But they should not be seen as a permanent substitute for sound economic policies. The sacrifices of ovEconomic Lifelineerseas Pakistanis deserve to be respected by using their contributions to build a stronger, more self-reliant economy.
The writer is a seasoned journalist and a communications professional. He can be reached at: tariqkikgmail.com