Daily Times

Pakistan received $3.1 billion in remittances from overseas workers in October 2024, marking a notable 23.9% increase compared to $2.46 billion in the same month of the previous year, according to data released by the State Bank of Pakistan (SBP) on Friday.

On a monthly basis, remittances rose by 6.7% from $2.86 billion in September 2024.

For the first four months of the fiscal year (4MFY25), remittance inflows surged by nearly 34.7% year-on-year, reaching $11.8 billion, up from $8.8 billion during the same period in FY24.

Analysts attribute this growth to a stable exchange rate, a narrowing gap between open market and inter-bank rates, the expansion of digital payment channels, and an increase in the number of workers migrating abroad. A breakdown of the data reveals that Saudi Arabia was the largest contributor to remittance inflows in October 2024, with Overseas Pakistanis sending $766.7 million. This represents a 12% increase from September and a 24% rise from $616.8 million in October 2023.

Remittances from the UAE also saw a significant rise, up 10% month-on-month from $562.7 million in September to $620.9 million in October, and a 31% increase compared to $473.9 million in October 2023.

The UK sent $429.5 million in remittances, a slight 1% increase from September’s $424.1 million, and a 30% year-on-year rise.

In contrast, remittances from the European Union declined by 2%, totaling $359.1 million in October, down from $365.5 million in September. Meanwhile, remittances from the US rose 8% month-on-month, reaching $299.3 million in October.

To further boost remittance inflows, the SBP recently revised its incentive structure for banks and exchange companies, introducing both fixed and variable components aimed at encouraging higher remittance levels.

After a sluggish period in 2023 due to domestic uncertainties and the disparity between official and unofficial exchange rates, remittance inflows have been recovering. Since March 2024, remittances have been consistently strong, averaging $3 billion per month, with a peak of $3.2 billion in May. These remittances have become a vital source of foreign exchange for Pakistan, especially given the country’s weak export performance.

Remittances play a crucial role in supporting the country’s foreign exchange reserves. According to a report by Insight Securities, the steady growth in remittances over the past two decades has helped mitigate the impact of the widening trade deficit and supported the balance of payments.

In addition to supporting household incomes, remittances also fuel domestic consumption, driving activity in various sectors of the economy.

Pakistan faced its worst economic crisis in 2023, marked by record-high inflation and the threat of sovereign default, before securing a $3 billion bailout from the International Monetary Fund (IMF). The successful conclusion of a nine-month IMF stand-by arrangement in April brought macroeconomic stability, leading to a decrease in inflation. In turn, Moody’s credit ratings agency upgraded Pakistan’s local and foreign currency issuer ratings from ‘Caa3’ to ‘Caa2’, citing improvements in the country’s macroeconomic conditions, government liquidity, and external position.

With the implementation of a larger, longer-term IMF loan program, Pakistan aims to ensure lasting macroeconomic stability. The current account deficit has been kept under control, supported by stronger remittances and improved exports. After receiving the first $1.03 billion tranche of a $7 billion IMF loan, the central bank’s foreign exchange reserves increased to $10.7 billion by September 27, enough to cover more than two months of imports.