Remittances cross $34.9b for FY2025
The State Bank of Pakistan (SBP) reported a robust increase in workers' remittances for May 2025, providing crucial support to the external sector amid a widening trade imbalance caused by rising imports and declining exports.
According to the latest data, total remittance inflows reached $3.7 billion in May, up around 14% year-on-year. This upward trajectory has been a consistent feature throughout the ongoing fiscal year 2024-25, offering some relief to Pakistan's external account pressures.
"Workers' remittances reflect robust growth of 16% month-on-month and 13.7% year-on-year, signalling sustained confidence of overseas Pakistanis in formal banking channels," said Ali Najib, Deputy Head of Trading at Arif Habib Limited (AHL).
Cumulative inflows from July to May FY2025 stood at $34.9 billion, marking a strong 28.8% increase from the same period last year, he said. This rise is likely due to improved documentation, regulatory support, and seasonal Eid-related transfers.
Saudi Arabia, the United Arab Emirates (UAE), the United Kingdom (UK), and the United States (US) remained the top contributors, with the rising trend offering vital support to foreign exchange reserves.
Saudi Arabia led with $913.9 million, followed by the UAE at $754.2 million and the UK at $588.1 million. The UAE showed the strongest growth, with a 45.7% increase during July-May, and Dubai alone sending $567.2 million in May. European Union (EU) countries posted a 28.1% rise, with Italy contributing $118.2 million.
Significant year-on-year growth was seen from non-traditional markets such as South Africa (74%), Ireland (53.1%), and Malaysia (40.4%). This reflects the Pakistani population's struggle for gradual diversification as traditional markets become more saturated.
Monthly figures showed a peak in March 2025 at $4.05 billion, with steady inflows continuing through May. The fiscal year's average monthly remittance stood at $2.52 billion, up 10.7% from FY24.
Experts attribute the surge to favourable economic conditions in host countries, a stable exchange rate, and Pakistan's push to formalise channels through digital platforms like Roshan Digital Account and SBP EasyData. These reforms have improved transparency and accessibility, making formal remittance channels more attractive for overseas Pakistanis.
Despite gains, concerns remain about the sustainability and inclusivity of this growth. Heavy reliance on traditional markets - accounting for 61% of inflows — exposes Pakistan to risks from labour policy changes or economic slowdowns in those regions.
Remittances from the US declined 12.4% year-on-year in May 2025, possibly due to regulatory tightening or demographic shifts in the diaspora.
High transfer costs between 5% and 7% — continue to drive users toward informal channels like hawala. Persistent exchange rate gaps between official and parallel markets also reduce incentives to use formal systems.
Data issues complicate accurate analysis. There is limited reporting on remittance purposes, and foreign currency account flows are included in headline figures.
Structural challenges persist as well. Most Pakistani workers abroad are in low-skilled jobs, especially in Gulf countries, making inflows vulnerable to wage stagnation and automation in labour-importing countries such as Saudi Arabia under its Vision 2030 reforms. Moreover, Pakistan's policies have yet to fully engage the diaspora in high-value activities beyond basic remittances, such as investments in bonds or startups.
Seasonal fluctuations also affect stability. The 16% month-on-month jump in May 2025, partly due to Eid, highlights the volatility of these flows. This contrasts from April-May patterns in previous years, underlining their unpredictability.
To improve resilience, experts recommend diversifying labour destinations, cutting transfer costs through fintech collaboration, publishing detailed remittance data, and upskilling workers to meet demand in advanced economies.
Such measures are critical to ensuring that remittances continue to serve as a resilient and growth-supporting element of Pakistan's economy, which remains reliant on these inflows for covering 8-10% of its GDP.
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