Remittances hit $3.7bn in May, surge to second-highest level

KARACHI: Remittances to Pakistan jumped in May to their second-highest level on record, driven by Eid-related inflows and an increasing trend of expatriates opting for formal channels to send money home.

Pakistan received $3.7 billion in remittances in May, reflecting a 16 per cent increase from the previous month and a 13.7 per cent rise compared to the same month last year, the central bank data showed on Wednesday.

These inflows brought total remittances for the 11 months of the fiscal year 2025 to $34.9 billion, representing a 28.8 per cent rise from $27.1 billion during the same period last year. Remittances have been on the rise, peaking at a record-breaking $4.1 billion in March, the highest single-month inflow ever recorded.

Analysts attribute this growth to the country’s economic recovery, supported by the International Monetary Fund loan programme, as well as exchange rate stability and the incentives provided by the government and the central bank. Improvements in the financial system have also facilitated overseas Pakistanis in sending funds home through formal banking channels. The increase in remittances in May was partially due to seasonal transfers ahead of Eidul Azha, as people send money to their families for the purchase of sacrificial animals.

“This is because of higher inflows on the eve of the month as people send money to their homes for the sacrifice,” said Awais Ashraf, director of research at AKD Securities Limited, referring to the rise in remittances for May.

The Pakistan Economic Survey for FY25, released on Monday, found that the increase in remittances was supported by strong labour markets and easing inflation in the US and Europe during late 2023 and into 2024. This positive economic environment contributed to an increase in real wages and, consequently, remittance inflows. In the GCC region, expanding mega-projects in Saudi Arabia resulted in higher employment opportunities for migrants, further boosting remittances.

The survey said the elevated remittance levels provide essential support to Pakistan’s external accounts, helping to offset trade and primary income deficits while alleviating the effects of imports outpacing exports amid rising domestic demand and relaxed import controls.

“To maintain this momentum, sustained strengthening of labour markets, strategic policy measures, and expanded financial inclusion will be critical in maximising remittance inflows and reinforcing external stability. The government is committed to implementing these measures,” the survey stated.

Governor of the State Bank of Pakistan Jameel Ahmad expects remittances to reach nearly $38 billion in the current fiscal year, an increase from $30.3 billion in FY24. The government has also set a remittances target of $39.4 billion for FY26. Additionally, the current account deficit target for FY26 is set at $2.1 billion, or 0.5 per cent of GDP, compared to a revised target of a $1.5 billion surplus, or 0.4 per cent of GDP, for FY25.

The remittance figures were released following Finance Minister Muhammad Aurangzeb’s presentation of Pakistan’s annual budget for the next fiscal year on Tuesday. This budget underscores the government’s commitment to fiscal consolidation, a key requirement of the International Monetary Fund’s loan programme. Aurangzeb announced plans to achieve a 4.2 per cent economic growth rate, with inflation projected at 7.5 per cent for FY26, while also reducing overall spending, increasing defence expenditures, and tightening tax measures.