Remittances expose Gulf dependency

Saudi Arabia, UAE account for over half of $34b inflows amid regional tensions

KARACHI:

Pakistan has received nearly $34 billion in remittances so far this fiscal year, largely from Saudi Arabia and the United Arab Emirates (UAE). The heavy reliance on Gulf countries is increasingly being viewed as a major economic vulnerability amid rising geopolitical tensions in the Middle East.

Concerns are also mounting against the backdrop of reports about the UAE withdrawing its $3 billion support facility from Pakistan and expelling some Pakistanis.

According to the State Bank of Pakistan (SBP), remittances stood at $3.54 billion in April 2026, up 11% compared with the same month last year, although down 8% from March levels. Total remittances during the first 10 months of FY26 reached $33.86 billion, reflecting an increase of 8.5% year?on?year.

However, the composition of these inflows is raising alarm among analysts. Data showed that Saudi Arabia, the UAE and other Gulf Cooperation Council (GCC) countries together contributed more than $18 billion during 10MFY26 – accounting for well over half of Pakistan's total remittance inflows. Saudi Arabia alone contributed $7.93 billion, while inflows from the UAE stood at $7 billion.

The concentration of inflows from a single region exposes Pakistan to significant external shocks, particularly at a time when geopolitical uncertainty in the Gulf has intensified following escalating regional tensions and fears of broader conflict.

"The external account outlook remains fickle as FY26 approaches closure," said Waqas Ghani Kukaswadia, Head of Research at JS Global."With crude oil prices elevated and import momentum likely to persist, the current account faces material pressure that domestic production cannot offset. In this context, remittances have transitioned from a supporting buffer to an essential stabiliser. Should inflows weaken, particularly from the GCC region where concentration risk is acute, the external account could slide into deficit again."

Pakistan has historically relied on overseas workers, particularly in Saudi Arabia and the UAE, to support its balance of payments position. Remittances often help offset a large portion of the country's trade deficit, which has widened again this fiscal year amid recovering industrial activity and higher energy imports.

Analysts noted that while elevated oil prices can temporarily support Gulf economies and sustain labour demand, prolonged conflict or economic disruptions in the region could create uncertainty for migrant employment and remittance flows. The vulnerability becomes more pronounced as Pakistan's external financing cushion remains thin.

Kukaswadia noted that foreign exchange reserve targets had already been revised downward by about $1 billion, increasing the country's dependence on external financing and remittance stability."The margin for error is thin," he warned.

Brokerage houses said remittances remain one of the few consistently stable components of Pakistan's external sector at a time when exports continue to struggle with structural competitiveness issues. Topline Securities, in a research note, projected FY26 remittances at about $41 billion, up 7% from FY25 levels of approximately $38 billion. The brokerage attributed the latest annual increase partly to festive?related inflows and continued formalisation of transfer channels.

Still, analysts cautioned that Pakistan's long?term reliance on labour exports instead of expanding productive exports reflects deeper structural weaknesses within the economy. Human capital exports are increasingly compensating for the underperformance of merchandise exports. This model may provide temporary balance of payments relief, but some economists argue that it also increases Pakistan's exposure to labour market shifts and immigration policies in host countries.

The risks are particularly relevant as Gulf countries accelerate labour nationalisation programmes aimed at increasing local employment participation. Measures such as Saudisation and Emiratisation have already reshaped hiring trends in several sectors.

At the same time, economists pointed out that Pakistan has made limited progress in diversifying its remittance base despite some improvement in inflows from Europe and North America. Remittances from European Union countries rose 18% year?on?year during 10MFY26 to $4.35 billion, while inflows from the UK increased 8% to $5.17 billion. Analysts said those trends indicate growing migration diversification, particularly among skilled workers moving towards Europe, Canada and Australia.

Meanwhile, Pakistan recorded its highest?ever monthly gross inflows under the Roshan Digital Account (RDA), reaching $321 million in April 2026, compared with the six?month average of $239 million and the long?term average of $187 million since inception in September 2020, according to Topline. Net inflows (gross inflow less funds repatriated) under the RDA clocked in at $293 million in April 2026, versus the last six?month average of $214 million and an average of $157 million since its launch.

Furthermore, the rupee gained 0.01% against the US dollar in the inter?bank market on Monday, closing at Rs278.67, up Rs0.03 from Friday's close of Rs278.70. Gold prices dropped Rs5,300 to Rs488,362 per tola, while 10?gram gold fell Rs4,544 to Rs418,691, according to the All?Pakistan Gems and Jewellers Sarafa Association (APGJSA). Internationally, gold decreased by $53 to $4,660 per ounce. Silver prices remained unchanged at Rs8,513 per tola.