Remittances hit all-time high of $8.8bn in 1Q

KARACHI: Pakistan received record remittances in the first quarter of the fiscal year 2025, as workers living abroad continued sending cash back home and supporting the country’s economy.

Money sent home by Pakistani citizens working overseas totalled $8.8 billion in July-September FY25, marking a 38.8 percent increase compared to the same period last year, according to central bank data published on Wednesday.

The country recorded its highest-ever quarterly remittances in July-September of this fiscal year, Arif Habib Limited, a brokerage house based in Karachi, said this in a brief note.The increase in remittances was attributed to the stability of the Pakistani rupee, a reduced gap between open and interbank market rates, and an increase in the number of workers relocating abroad, it said.

The remittances flow increased 29 per cent year-on-year to $2.8 billion in September. On a monthly basis, these inflows decreased by 3.0 per cent in September.“These stronger inflows will help Pakistan in maintaining rupee stability and containing the current account deficit,” said Topline Securities.

Remittances, which were lacklustre during 2023 due to domestic uncertainty and the disparity between official and unofficial exchange rates, have begun to recover. These inflows have been on the rise, with a strong rebound since March 2024, reaching an average of $3 billion per month and hitting a high of $3.2 billion in May. Healthy remittances have become crucial for Pakistan’s economy, especially given the country’s sluggish export performance. Remittances are an important source of foreign exchange reserves for the country. A report from Insight Securities highlighted the steady growth in remittances over the last 20 years, which has helped offset the impact of the growing trade deficit and supported the balance of payments. The increase in remittances provides livelihoods for many households and also supports domestic consumption, thereby fuelling various sectors of the economy.

This growth in remittances is attributed to the significant migration of labour to the Middle East, particularly Saudi Arabia and the United Arab Emirates (UAE).The number of people leaving Pakistan has significantly increased as a result of the country’s deteriorating political and economic circumstances, especially in the last two years when political and economic unrest was at its highest.

The SBP’s data showed that remittances from Saudi Arabia rose 42 per cent to $2.1 billion in July-September FY25. Pakistan received $1.7 billion from workers residing in the UAE in the first quarter of FY25, a 67 per cent increase from a year earlier. The report anticipates that the increasing trend in remittances will continue, supported by significant changes in the economic and political environment over the past 12 months. Uncertainty has decreased, and concerns about a sharp devaluation are no longer widespread.

“We estimate that workers’ remittances will show the YoY growth of 15 per cent in FY25, reaching around $35 billion. The recent trend of workers emigrating and the resilience of remittances from the Middle East in a declining oil price environment further solidify our thesis,” it said.

Pakistan had been faced its worst economic crisis, witnessed highest-ever inflation and was on the brink of a sovereign default last summer before receiving a $3 billion bailout from the International Monetary Fund (IMF). The successful conclusion of the nine-month IMF’s stand-by arrangement in April provided macroeconomic stability. Since then, inflation has eased, and credit ratings agency Moody’s has upgraded Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to ‘Caa2’ from ‘Caa3’, citing improving macroeconomic conditions and moderately better government liquidity and external positions.

The implementation of the new larger and longer IMF loan programme is expected to ensure lasting macroeconomic stability. The current account deficit has remained under control due to an increase in foreign exchange reserves supported by strong remittances and improvement in exports.

Following the receipt of the $1.03 billion first tranche of the $7 billion loan from the IMF, the central bank’s forex reserves increased to $10.7 billion as of September 27, enough to fund more than two months of imports.