Remittances hit record $38.3b
Pakistan's worker remittances dropped 8% month-on-month (MoM) to $3.41 billion in June 2025, marking the end of a robust fiscal year. Despite the monthly dip, remittances for FY25 surged 27% year-on-year (YoY), reaching an all-time high of $38.3 billion.
It comes in the wake of political and economic turmoil, which has forced a significant number of people to pursue migration. During June 2025, remittances amounted to $3.4 billion, up 8% from $3.2 billion in June 2024. However, inflows were down 8% MoM compared to $3.7 billion in May 2025, reflecting a typical post-Eid moderation.
The sharp rise reflects multiple contributing factors, noted Arif Habib Limited Deputy Head of Trading Ali Najib. "Firstly, improved global economic conditions in key host countries, particularly in the Gulf region, supported higher income levels for overseas Pakistanis," he said.
Secondly, there was formalisation of remittance channels, aided by the State Bank of Pakistan's (SBP) incentives under the Pakistan Remittance Initiative (PRI), and reduced reliance on informal means such as Hundi/Hawala, he added.
Moreover, the relative stability of the rupee and tighter regulation of foreign exchange markets made formal transfers more attractive. The increase also signals rising confidence in Pakistan's banking system and a shift towards documented financial flows. The surge has positively impacted the country's current account position, supported foreign exchange reserves and provided crucial support to households dependent on remittances, thereby playing a significant role in stabilising macroeconomic fundamentals. "For FY26, $39.3 billion (around 3% YoY growth) is anticipated," said Najib.
The annual surge was driven by higher inflows from traditional corridors such as Saudi Arabia ($9.3 billion, up 26%), the UAE ($7.8 billion, up 41%) and the UK ($5.9 billion, up 31%), as well as significant growth from EU countries ($4.5 billion, up 29%). Despite a 13% YoY decline in remittances from the United States, strong growth from the Gulf and Europe more than offset the shortfall.
The robust rise in remittances played a key role in strengthening Pakistan's external account during FY25, supported by policy efforts to encourage the use of formal channels and digital banking platforms such as Roshan Digital Accounts.
Pakistan is now one of the top five countries receiving the most remittances. Bangladesh also saw record inflows of $30 billion, up 26%, said Topline Securities CEO Mohammed Sohail. "They are a big source of support for both economies, helping bridge external gaps and boosting household incomes."
However, the latest data for June 2025 reveals several emerging challenges. One of the most notable concerns is the MoM decline of 7.6% as remittances dropped to $3.406 billion in June from $3.686 billion in May. This drop, occurring right after Eidul Azha, points to a pattern of volatility that continues to affect the stability of inflows. Although fiscal year 2025 ended with a record $38.3 billion, monthly dips signal that Pakistan's remittances remain highly seasonal and potentially vulnerable to external shocks.
Country-wise data further highlights key risks. Remittances from the US declined 10.5% MoM and 12.7% YoY, indicating a significant downturn in inflows from a major contributor. Similarly, the United Kingdom and the UAE reported monthly declines of 8.6% and 4.9%, respectively. This is concerning given that these three countries, along with Saudi Arabia, account for nearly 70% of total remittances. Such concentration poses a serious risk – any geopolitical, economic or regulatory changes in these countries could disproportionately impact Pakistan's external financing position.
Additionally, remittances from the Gulf Cooperation Council (GCC) countries, excluding Saudi Arabia and the UAE, saw a steep 16.1% MoM decline. While these countries posted overall growth for FY25, their dependence on oil revenues and increasingly localised labour policies could create future uncertainties for Pakistani workers. The decline in flows from developed countries like Japan (-30.4% YoY), Canada (-8.6% YoY) and Norway (-4.3% YoY) also points to stagnation in these corridors, possibly due to integration challenges, inflationary pressures or reduced remitter incomes.
Moreover, inflows from "other countries", which include less traditional destinations, fell 9% MoM in June, suggesting under-diversified diaspora engagement. Another structural issue is the country's reliance on seasonal inflows, particularly during Ramazan and Eid months. For example, March to May 2025 saw a surge, peaking at $4.1 billion, but the subsequent drop in June reflects over-dependence on religious occasions to drive remittances. Experts suggest that to ensure stable inflows, Pakistan must diversify remittance sources, boost skilled labour exports and strengthen incentives for formal channels.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
an hour ago
- Express Tribune
Tariff threat forces EU to hedge bets
Listen to article Barely months into Donald Trump's return to power, America's global standing has been bleeding credibility at a staggering pace, forcing many nations to prepare for a post-American world as tariff theatrics rattle the world. The American president's decision to impose a sweeping 30% tariff on EU exports has ruptured the fragile scaffolding of trust that long upheld the US-EU relationship. Although Europe has repeatedly aligned itself with Washington, often to the bewilderment of its own citizens, it appears to be showing signs of hedging its bets. EU allies, long and strangely willing to toe the American line on so-called "common" security and economic interests, are beginning to scramble for cover from Washington's whims, as the facade of shared purpose wears thin. The push for self-reliance is beginning to forge a rare moment of cohesion in the EU, finding an alternative to the disunity that marked the Brexit years. The shift was plain when European Commission President Ursula von der Leyen, while signing a cooperation pledge with Japan recently, remarked that the EU was now seeking "more reliable partners" to counter economic coercion and unfair trade practices — a barbed formulation that conspicuously sidesteps the US. Timing, too, is everything. The EU has yet to clinch a free trade deal with Washington, and the sudden tariff spike has landed like a hammer blow amid delicate negotiations with a looming deadline set by Washington. However, Europe's response is not simply reactive. European officials warned that such a tariff would "practically prohibit" transatlantic trade and inflict deep damage on economies that export over 20% of their goods to the US, with Germany alone sending over $174.5 billion worth of products in 2024. Brussels activated a first wave of counter-tariffs, suspended only until August 6, covering €21 billion of US goods. A second package, initially targeting €95 billion, was whittled down through fierce internal lobbying to €72 billion, sparing items like diagnostic reagents, semiconductor-manufacturing machines and key medical devices deemed too critical to Europe's own supply chains. Anti-Coercion Instrument Meanwhile, EU diplomats quietly dusted off their most potent, never-used tool: the Anti-Coercion Instrument (ACI). Designed in 2023 to deter economic blackmail, the ACI can impose duties, quotas, investment restrictions and limits on public procurement against any country that "coerces" EU members. Where WTO courts have failed, the mechanism allows qualified majority action — 15 states representing 65% of the EU population — circumventing the need for unanimity. Analysts observe that just floating the ACI sends a powerful signal: Europe is done being a passive victim of trade bullying. Germany, once cautious about escalation, now publicly supports considering the ACI. France has long championed it. Even Italy's far-right leadership, initially tipped to cosy up to Trump, has resisted side deals and endorsed a firm, collective stance. The recent EU-Japan pledge to deepen cooperation was one sign of the recalibration. So too is the EU's intensified internal debate over "strategic autonomy", a term that gained currency after Trump's earlier attacks on Nato and withdrawal from key international agreements. The sentiment was even more audible in the Spanish prime minister's recent statement. At a business forum in Paraguay, he not only decried the US for "unfounded and unfair" measures, but also proposed using retaliatory funds to create an EU solidarity fund for affected industries. Similarly, Denmark reported a record 74% public trust in the EU — up from 63% five years ago — crediting a shared sense of resisting external coercion. Earlier this month, the UK, still navigating post-Brexit independence, joined the WTO's interim appeals mechanism (excluding the US) to safeguard its ability to challenge future trade distortions. Asian allies are likewise on edge: Singapore's defence minister lamented that the US has shifted "from liberator... to a landlord seeking rent". Strategic autonomy A decade ago, the talk of "strategic autonomy" in Brussels elicited polite nods and little action. Today, it has become doctrine. In a recent interview with BBC, German Chancellor Friedrich Merz declared that Europe can no longer be a free rider on US security guarantees, announcing stepped-up defence spending and trilateral security dialogues with France and the UK (the so-called E3). Together, the UK, Germany and France are working on a triangular alliance of major European powers, which Merz says will focus not just on security and foreign policy but on economic growth as well. France and Germany have extended joint procurement plans, while Spain and Italy have explored loosening Nato's centrality in favour of EU-driven defence cooperation. Similarly, Spain and the Netherlands, once sceptical of EU defence, now champion flexibility in EU budget rules to fund military modernisation. Even before taking office, the German chancellor had made waves on the night of his election victory by declaring that the Trump administration was "largely indifferent to the fate of Europe". Asked in the BBC interview whether his view had shifted, he responded that it had not, noting that Trump was "not as clear and as committed as former US presidents were, former US administrations were". Observers point out that European defence budgets, long kept low relative to GDP, are now under political pressure to rise. The EU's joint procurement loan facility — €150 billion in shared borrowing — aims to accelerate drone and artillery acquisitions. An Institute for Global Affairs (Eurasia Group) report finds that Western Europeans are urging their leaders to "stand up to Trump" and even seek partial autonomy from Washington. Even before Trump's return, think tanks were noting how Washington's browbeating of Europe and Latin America was prompting those regions to forge independent arrangements — from a European "army of Europe" to new Asian trade pacts — to hedge against US caprice. One Pew report found that in the past year, only 27% of Europeans have confidence in Trump and fear is growing that a faltering US will neglect Nato and other security guarantees. Remarkably, the 2025 Democracy Perception Index shows China overtaking the US as the world's most positively viewed major power. Beijing is now negotiating a standalone climate pact with the EU. Analysts calculate that Chinese clean tech exports reduced global emissions by roughly 1% in 2024, strengthening Beijing's claim to climate leadership. Latin American nations are doing the same. Brazil, fresh from calling US tariffs "overtly political", established a new Brazilian tax office in Beijing — only the fifth of its kind — signalling where Rio now sees its most dependable partner. The old trust in American stewardship is obsolete, and Europe's halting steps toward strategic autonomy and the assertive postures of others show that a shared resolve to envision a world without Uncle Sam's shield is gaining momentum. The writer is a Lahore-based senior journalist
Express Tribune
an hour ago
- Express Tribune
Time to keep rates unchanged
Pakistan's real long-term growth won't come from slashing rates prematurely; it will come from shifting the engine of growth towards productivity, not consumption. Photo: file Listen to article The State Bank of Pakistan (SBP) is set to announce its monetary policy decision on July 30, and all eyes will be on whether it cuts interest rates again or chooses to hold. In my view — as an analyst tracking macroeconomic and capital market signals closely — no change is warranted at this point. Pakistan has already seen a dramatic reversal in policy rates — from a staggering 22% to a relatively benign 11% as of May 2025. That's not just a rate cut; that's a full-blown pivot. While this brings welcome relief to borrowers and a much-needed growth stimulus, macroeconomics doesn't respond overnight. A monetary easing of this magnitude usually takes two to three quarters to trickle into the real economy. A premature cut now would be like offering dessert before the main course has even been served. Let's not overfeed an economy still digesting the last policy meal. The YoY inflation dip into the low-to-mid 3% range in recent months has largely been driven by the base effect, not necessarily a fundamental deceleration. With energy tariff adjustments, expected global commodity swings, and reduction in remittance incentives, inflation is likely to re-enter the 7-9% band by year-end. SBP's long-term inflation target band of 5-7% is admirable, but it must also guard real interest rates — ideally 3-5% positive — to sustain current account balance, contain imports, and maintain currency stability. History has shown that dipping below this zone leads to overheating, demand-pull inflation, and pressure on external buffers. We can't afford to repeat that cycle again. Don't light the fuse in year three SBP Governor Jameel Ahmad has repeatedly spoken about avoiding the boom-and-bust mistakes of the past — and he's right. The third year of any macro stabilisation programme is the most vulnerable: the temptation to cut too early is strongest, the political cycle begins to heat up, and the reserves appear deceptively comfortable. But here's the catch — Pakistan's FX reserves, while improved, are still largely propped up by bilateral rollovers, multilateral support, and deferred repayments. This is not the time to fire the bazooka. Instead, it's time to keep a measured hand on the lever, especially as tariff rationalisation under the new National Tariff Policy (NTP 2025-30) continues to lower energy costs for export-oriented industries. Cheaper electricity and gas — if passed on to the right sectors like IT, mining, value-added agriculture, light manufacturing and services — can help Pakistan grow its exports, climb global supply chains, and attract long-term FDI. Let exports earn the right to cut rates. Let Moody's and S&P reward discipline with credit upgrades. Let credit default swap spreads tighten, PIA and ZTBL get privatised, and DISCOs become financially viable. That's when we'll have truly earned macroeconomic space for deeper cuts. Remittance risk: the sleeping volcano Another red flag that must not be ignored is the government's rollback of incentives on incremental remittances — a move that could seriously dent the current account. The Rs200 billion ($700 million) subsidy in previous years catalysed nearly $8 billion in incremental inflows — a 10x multiplier by some measures. Removing this carrot risks not just a slowdown in remittances but also a hit to FX reserves and rupee stability. If remittances stall, and imports rise as expected (especially due to reduced duties on used cars and improved cotton harvest conditions), we could see import bills swell by 15-20% over the next two years, or $9-12 billion higher by FY27. Even with gradual 3-4% annual rupee depreciation, strong export growth and a 1-2% current account deficit might be manageable – but only if we resist the urge to cut early. Better tools than rate cuts Instead of cutting rates broadly, the SBP should fine-tune credit where it's needed most: a) Increase auto financing limits to support local manufacturers threatened by rising used car imports. b) Expand low-cost housing schemes to revive construction and employment. c) Enhance subsidised student and SME loans, especially in high-impact sectors like IT, logistics, and value-added exports. d) Scale up green financing tools, particularly EV loans, solar leasing, and youth/agribusiness schemes under PM's programmes. These targeted tools are far more effective than blunt rate cuts, and crucially, they don't unleash import-led growth. Time to hold Pakistan's real long-term growth won't come from slashing rates prematurely. It will come from shifting the engine of growth towards productivity, not consumption. That means: Strengthening local linkages in mining and agricultural exports; promoting value-added manufacturing with predictable energy and logistics policies; deepening integration into global IT and services value chains; and clearing fiscal clutter, like privatising loss-making state enterprises, to finally create room for sustainable interest rate compression. In the end, monetary policy is not a magic wand. It's a signal. And right now, the best signal SBP can send to global investors, credit agencies, and Pakistanis alike is stability, prudence, and patience. Because when you're walking a tightrope, the smartest thing you can do — is not jump. The writer is an independent economic analyst
Business Recorder
2 hours ago
- Business Recorder
A 100bps cut in policy rate on the cards?
Following a recent visit to the Federal Reserve to inspect a renovation project, the tension between US President Donald Trump and Fed Chairman Jerome Powell was apparent. The future of Powell's position remains uncertain, as both appeared tense during their media presentation. When questioned about the Federal Reserve's renovation exceeding its budget, Trump remarked he would dismiss an employee over it but saw no need to fire the Fed Chairman. Despite a friction between them, the US dollar strengthened, buoyed by the market's confidence following Trump's assurance that Powell would not be let go. Meanwhile, June's durable goods data was disappointing due to weak orders for transportation equipment; it still exceeded expectations, contributing to Dollar's recovery. This weakness primarily stems from tariff pressures rather than other factors. Last week, both existing and new home sales figures fell short of market predictions, placing builders, buyers, and sellers under pressure in a housing market that plays a crucial role in the US economic cycle. Additionally, flash manufacturing PMI readings were weaker than anticipated. The Beige Book indicated that most Federal Reserve districts are experiencing modest growth in lending. Although there were some slight downward revisions, the overall situation remains tense due to persistent inflationary pressures and tariffs. The Federal Reserve's meeting on Tuesday and Wednesday is expected to maintain its current policy stance. It appears that the Fed may be gradually moving toward a rate-cutting cycle. Importantly, the looming August 1 deadline cannot be overlooked. Many of the analysts are predicting that the passing of tariff costs will soon impact consumers due to lag effects, potentially also affecting the labour market. However, there is a possibility for compromise between the US administration and the Federal Reserve. As the tariff situation stabilizes, Powell might hint at a data-driven rate cut in September as a conciliatory measure. As expected last week, the European Central Bank decided to keep its interest rate steady at 2%. With the pause in rate adjustments continuing, the ECB reiterated that its decisions will remain data-driven, making it clear that any future changes in interest rate policy will only be determined during meetings, without early commitments to a particular direction. This week is filled with significant economic reports from around the globe. Key US indicators to monitor include the 2nd quarter GDP, Personal Income and Spending (PCE), Non-Farm Payroll, and Consumer Confidence. In the meantime, the market is gearing up for a crucial week as six Central Banks prepare to announce their interest rate decisions. The State Bank of Pakistan (SBP) will share its policy rate on Wednesday. Except for the SBP, all the other banks are expected to keep their rates unchanged. GOLD @ $ 3337.50— This week, market is expected to see volatility. To move higher, gold must surpass $ 3360 to reach $ 3388 or potentially more. However, if it falls below $ 3302, it could decline to $ 3258 or even $ 3226. EURO @ 1.1742— Euro has strong support at 1.1610 and is expected to remain above this level. If it breaks through 1.1820, it may make a move toward 1.1895. Or else 1.1550. GBP @ 1.3439— Pound Sterling will continue to face pressure unless it surpasses 1.3570 to reach 1.3620. The risk of decline will rise if it breaks below 1.3280. JPY @ 147.67— There may still be some losses, but the USD needs to hold 146.20 to make some recovery. If it can break above 148.90, it will pave the way for testing the 150 levels. If not, watch for a drop to 145.40. SBP meeting today Last week, there was a notable change in the Pakistani foreign exchange market, a rarity in recent times, as the Rupee strengthened against the US Dollar. On Monday, it was around 285 to 1 USD, but by Friday, the SBP closed at 283.4539. It is said that administrative measures helped PKR to gain some strength. The future trend continues to be uncertain. Analyzing the data, it appears that Pakistan's economy is on an upswing. This can be supported by various metrics, for instance, the country's debt and deficit ratios indicate a stronger economic position compared to some emerging and advanced economies. The region's challenges, however, play a significant role. For comparative purposes, consider certain European nations that may hold their credit ratings despite underlying risks. Pakistan's geographical context and lack of diversity similar to weaker European economies further differentiate its situation. Additionally, geopolitical conditions have shifted considerably. After three years of struggles, Pakistan's overall foreign exchange reserves are nearing $ 20 billion, with SBP's FX Reserves at $ 14.46 billion. The current account balance and the payments position are consistently positive, with remittances steadily increasing. The International Reserve and Foreign Currency position (Derivatives) stands at $ 2.6 billion, while the CDS has sharply fallen by over 1200 basis points. Pakistan's international Euro and Dollar bonds are recovering from previous lows, and last week's credit rating improvement by S & P to B- reaffirms the progress in the economy. Nevertheless, the primary challenge lies in sustaining and enhancing these economic gains. This can be achieved by energizing economic activity and boosting liquidity via the banking sector, significantly increasing credit availability to the private sector. However, this alone may not be enough unless the tax-to-GDP ratio needs to be raised significantly. Despite these encouraging signs and with oil prices around $ 70 per barrel, the Pakistani Rupee should not have depreciated and should have remained stable. A stable PKR will assist the administration and monetary authorities in keeping inflation low, enabling the monetary policy committee to potentially lower the policy rate in alignment with inflation trends. Given these considerations, policymakers on Monday July 28, might think about reducing the interest rates by nearly 100 basis points. Copyright Business Recorder, 2025
