Remittances boom fades in April

Fall 22% MoM in April; up 13.1% on YoY; CA deficit estimated at $400m

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KARACHI:

Buoyant remittances, relied upon by the government to support its external financing needs, have witnessed a sharp 22% decline on a month-on-month basis in April 2025. This drop, following record inflows in March, has raised concerns over a potential current account deficit, which analysts estimate could fall between $350 and $400 million for the month.

Pakistan received workers' remittances worth $ 3.2 billion in April 2025, according to data released by the State Bank of Pakistan (SBP). This marks a 13.1% increase on a year-on-year basis, reflecting a continued trend of strong inflows from overseas Pakistanis.

The cumulative inflow during Jul-Apr FY25 has now reached $31.2 billion, representing a significant 30.9% rise compared to $23.9 billion in the same period last fiscal year. Key contributors to April's inflows were Saudi Arabia ($725.4 million), the United Arab Emirates ($657.6 million), the United Kingdom ($535.3 million), and the United States ($302.4 million).

"Although April's inflows were solid, they showed a month-on-month (MoM)decline when compared to the exceptionally high figure of $4.1 billion in March 2025," Commenting on the latest figures, Sana Tawfiq, Head of Research at Arif Habib Limited (AHL), told The Express Tribune. She attributed this dip to the end of seasonal factors, particularly the surge in remittances seen during Ramzan and Eid, which traditionally lead to a temporary spike in transfers. "Now that the Eid-related effect has subsided, a MoM correction was expected," she stated. Tawfiq emphasised that despite the decline from March, the average run-rate of remittances remains strong, which is a positive indicator for the economy.

Tawfiq also highlighted potential challenges for the external account, forecasting a current account deficit for April 2025, estimated in the range of $350–400 million. She pointed to the $5.5 billion import bill, as reflected in preliminary dat of Pakistan Bureau of Statistics (PBS), as a primary factor contributing to this deficit. While the SBP's final balance-of-payments data is still pending, the trade figures suggest a temporary widening in the current account gap. However, Tawfiq maintained an optimistic outlook for the full fiscal year, projecting a current account surplus of around $1.3 billion for FY25, assuming stability in remittance inflows and controlled imports.

Despite the short-term dip in April and a likely one-off deficit, the broader trend in workers' remittances remains favourable. These inflows continue to serve as a crucial buffer for Pakistan's external account, supporting macroeconomic stability amid global and domestic challenges.

Ali Najib, Head of Sales Insight Securities, said the increase in workers' remittances is primarily attributable to exchange rate stability, regulatory measures against informal transfer channels, growth in overseas employment, expansion of digital banking infrastructure, and supportive government policies. These factors collectively enhanced formal remittance inflows and bolstered external sector stability.

The current remittance growth, driven by increased labour migration to GCC countries, especially Saudi Arabia and the UAE, where regulatory reforms appear sustainable in the near term. However, evolving visa policies in those countries and potential economic fluctuations (especially the consistent declining trend in international oil prices) in the Gulf region pose medium-term risks to this trajectory. "Government should focus on diversifying remittance sources before it gets too late," said Najib.

Waqas Ghani Kukaswadia, Research Head of JS Global, said the current trajectory appears promising, especially with sustained labour demand in Saudi Arabia in the coming years. However, sustainability from the UAE remains uncertain due to a marked slowdown in labour exports to the country. If Pakistan is able to negotiate more flexible immigration policies with the UAE, it could unlock further growth in remittances. Overall, the trend is positive, but continued momentum will depend on maintaining currency stability and expanding labour market access in key Gulf economies.

The data on workers' remittances for April 2025 highlights several challenges that Pakistan faces in maintaining stable inflows from its diaspora. One key issue is the declining or volatile remittances from certain regions, such as the GCC countries (excluding Saudi Arabia and the UAE), where nations like Bahrain and Kuwait recorded negative growth in FY24.

Similarly, remittances from Japan and Canada saw significant drops in FY24, with Japan experiencing a sharp 33.3% decline. While some countries, like South Africa, rebounded strongly in FY25, their earlier negative growth underscores instability in these markets.

Another concern is the monthly volatility in remittance flows. For instance, remittances fell by 21.5% from March to April 2025, and the year-on-year growth for April (13.1%) was notably lower than March's 37.2%. Such fluctuations make it difficult to predict and plan for consistent foreign exchange earnings. Additionally, Pakistan's heavy reliance on a few key countries—Saudi Arabia, the UAE, the UK, and the US—for over half of its remittances poses a risk, as economic downturns or policy changes in these nations could disproportionately impact inflows.

The data also reveals underperformance in some EU countries, such as the Netherlands and Denmark, where remittances contracted in FY24 despite overall growth in the region.