Remittances rise by 31.7% to $20.8bn in July-January

KARACHI: Remittances sent to Pakistan surged to $20.8 billion in the seven months of fiscal year 2025 from $15.8 billion (31.7 per cent) a year earlier, the State Bank ofPakistan (SBP) said on Monday, a sign that contributions from overseas workers continue to support the nation’s economy.

In January alone, money sent from abroad reached $3 billion, a 25 per cent increase from last year. However, remittances fell by 2.5 per cent compared with the previous month.

Migrant workers are sending more money home to support their families, thanks to the country’s efforts to curb illegal foreign exchange trading, an increase in the number of citizens working abroad, and economic stability bolstered by the International Monetary Fund (IMF) bailout. The facility of Roshan Digital Accounts (RDA) has also made it easier for workers to send money.

The inflow of remittances plays a vital role in supporting Pakistan’s external accounts and foreign exchange reserves. Currently, the SBP’s forex reserves amount to $11.42 billion, sufficient to cover over two months’ worth of imports.

Analysts expect Pakistan to record a fourth consecutive current account surplus in January, driven by sustained remittances—despite a slight month-on-month decline—and a lower trade gap. Recent data from the Pakistan Bureau of Statistics (PBS) indicates that the trade deficit dropped to $2.313 billion in January, a decrease of 5.5 per cent from the previous month.

Arif Habib Limited, a brokerage house, reported last week that the country was expected to achieve a current account surplus of $168 million for January.

“We anticipate a current account surplus for January due to robust remittances, despite higher imports over the past two months, as reflected in PBS data, along with the current pace of interest payments and dividend repatriation,” noted Awais Ashraf, the director of research at AKD Securities Limited.

“However, the surplus would be relatively smaller in scale, while the possibility of a modest deficit cannot be ruled out,” Ashraf added.

Fitch Ratings, a credit rating agency, stated in its latest commentary that strong remittance inflows, robust agricultural exports, and tight policy measures have allowed Pakistan’s current account to achieve a surplus of approximately $1.2 billion (over 0.5 per cent of GDP) in the six months to December 2024, compared with a similar-sized deficit in FY24. Reforms in the foreign exchange market during 2023 also facilitated this shift.

However, Fitch noted that Pakistan’s external financing needs will remain significant in the coming year. The South Asian nation is required to repay over $22 billion in external debt during the current fiscal year, which includes nearly $13 billion in bilateral deposits.

“Declining external liquidity, such as delays in IMF reviews, could lead to negative action,” the rating agency cautioned. Nevertheless, Fitch acknowledged that Pakistan has made strides in rebuilding its forex reserves and has outperformed the targets set by the IMF.

Pakistan has successfully met three out of five major fiscal conditions imposed by the IMF. The forthcoming IMF review in March is crucial for securing the next $1 billion loan tranche, although analysts believe there are no significant hurdles to its approval.