Remittances surge 25.2% YoY to $3b

Pakistan's workers' remittances recorded a strong inflow of $3 billion in January 2025, reflecting a 25.2% year-on-year (YoY) growth and marking the fourth consecutive current account surplus in 2025.

Cumulatively, from July to January of the fiscal year 2025, remittances reached $20.8 billion, marking a 31.7% increase compared to $15.8 billion in the same period last year, according to the State Bank of Pakistan (SBP).

Major sources of remittance inflows in January included Saudi Arabia ($728.3 million), the United Arab Emirates ($621.7 million), the United Kingdom ($443.6 million), and the United States ($298.5 million). Analysts expect this upward trend to continue, with Sana Tawfiq, Head of Research at Arif Habib Limited (AHL), stating, "The surge aligns with market expectations."

This rise in remittances is seen as a key driver of Pakistan's improving external account position. Pakistan's current account surplus continued its upward trend in January 2025, marking the fourth consecutive month in positive territory, according to AHL. According to data released by the Pakistan Bureau of Statistics (PBS), the trade deficit declined by 5.5% month-on-month (MoM) to $2.313 billion in January. Based on estimates, the country is expected to post a current account surplus of $168 million for the month, driven by a goods trade deficit of $2.082 billion, a services deficit of $200 million, a primary income deficit of $750 million, and a secondary income balance of $3.2 billion. The overall surplus for the first seven months of the fiscal year (7MFY25) is projected to reach $1.4 billion.

"At this run rate, workers' remittances for FY25 are projected to cross $35 billion," said Deputy Head of Research JS Global Waqas Ghani Kukaswadia. Remittances over the past eleven months have averaged $3 billion per month, a significant increase from the $2.3-$2.4 billion monthly average seen in FY23 and most of FY24. The major contributor to this positive trend is workers' remittances, which recorded an inflow of $3.0 billion in January 2025, reflecting a 25.2% YoY growth, according to the SBP. Cumulatively, during July-January FY25, remittances stood at $20.8 billion, a 31.7% increase compared to $15.8 billion in the same period last year.

Pakistan's remittance inflows remained elevated in January 2025, hitting the $3.0 billion mark and reflecting a 25% YoY increase, said Kukaswadia. Cumulatively, during 7MFY25, overseas Pakistanis sent home a record $20.8 billion (+32% YoY) in remittances. The growth was led by strong remittance flows from the UAE and Saudi Arabia, with a jump of 52% YoY and 24%, respectively, in January 2025. The UAE's share over the past two fiscal years was around 17.5%, but it has now risen to 21%, with Dubai contributing the largest portion, accounting for three-fourths of the remittances from the UAE, he added.

Recent months have witnessed a remarkable turnaround in Pakistan's current account, with remittances providing crucial support and playing a key role in sustaining current account surpluses.

Experts say the increase is due to the growing number of Pakistanis leaving the country on student or worker visas, which has both positive and negative implications for the economy. Over the last three years, 600,000 to 800,000 people have left the country, most of them highly educated, leading to a brain drain.

While remittances sent by these individuals contribute significantly to foreign exchange reserves, the underlying causes and long-term consequences of this "economic migration" raise concerns about the government's ability to provide adequate opportunities within the country. Although remittances help bolster reserves, stabilise the balance of payments, and finance imports in the short term, critics argue that reliance on remittances masks deeper structural issues. The exodus of skilled professionals limits innovation and long-term economic growth, highlighting the need for domestic opportunities to retain talent.