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Express Tribune
10-07-2025
- Business
- Express Tribune
Remittances hit record $38.3b
Listen to article 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.
Express Tribune
22-06-2025
- Business
- Express Tribune
SBP seeks tax on foreign investment
Listen to article As the local currency comes under renewed stress, the State Bank of Pakistan (SBP) on Saturday proposed linking tax benefits with a minimum one-year retention period for foreign investments in government debt and equity markets to bring predictability in outflows. Dr Mohammad Ali Malik, an SBP executive, suggested the 10% reduced income tax rate should be tied to at least one-year retention of investment made through the Special Convertible Rupee Account (SCRA). He made the proposal during a meeting of the National Assembly Standing Committee on Finance, chaired by Pakistan People's Party (PPP)'s Syed Naveed Qamar. Federal Board of Revenue (FBR) Chairman Rashid Langrial said that investors were securing tax advantages by making short-term investments. He recommended a minimum six-month holding period for investments in Roshan Digital Accounts and other schemes to qualify for tax benefits. With this, the central bank seeks more predictable dollar outflows. However, the committee warned that such a move could deter investors, which the government could not afford. Dr Malik argued that the condition would not disrupt current inflows, as significant investments in treasury bills, government bonds, and SCRAs were not presently being made. He said linking tax incentives with long-term investments could help stabilise outflows. Under SBP regulations, non-residents may freely invest and trade in government marketable securities, including Pakistan Investment Bonds (PIBs), Treasury Bills (TBs), registered corporate debt instruments, and the Water and Power Development Authority (WAPDA)'s registered bonds through SCRAs. Following months of stability, the rupee has again come under pressure due to increased debt repayments. The rupee's value has depreciated to around Rs284 per US dollar in the interbank market, with even higher rates in the open market. A senior executive from a private commercial bank said large interbank transactions are being settled at nearly Rs3 above the average market rate. In an economic alert issued Saturday, advisory firm Tola Associates warned that ongoing unrest in the Middle East and Pakistan's reliance on imported oil posed serious risks of economic disruption. Crude oil prices, it stated, have surged over the past two weeks, rising from $63.76 on June 2 to $76.31 per barrel by June 19 due to the ongoing Gulf conflict. Tola Associates noted a dual inflationary impact on Pakistan's economy: higher crude prices widen the current account deficit and weaken the rupee against the dollar, which further fuels inflation. If crude oil hits $80 per barrel, the rupee may slide to Rs285.4 per dollar; if it rises to $100, the rupee could depreciate further to Rs292.1. In that case, local petrol prices may need to rise by Rs35 per litre, the firm said. The government has already formed a committee, chaired by Finance Minister Muhammad Aurangzeb, to review the implications of Israel's illegal act of war against Iran on Pakistan's economy and petroleum flows. Tola Associates said that the direct impact of higher crude prices on domestic petrol rates may further fuel inflation and make life more difficult for the people of Pakistan. It has estimated the additional impact of inflation by 1.8% in case crude oil price increases to $80 and 8.7% if the prices surge to $100. The current account deficit is also projected to widen to $4.3 billion in the next fiscal year, if crude oil hits $100 price. The standing committee also reviewed another proposal: taxing income from government debt investments even if withdrawn before maturity. Currently, some investors evade taxes by prematurely selling and rebuying securities — a tactic known as "coupon washing." The FBR proposed in the budget that tax be charged on the investment regardless of early withdrawal, estimating an additional Rs10 billion in revenue. However, the committee adjusted the proposal, reducing the required holding period from one year to six months. Last month, the FBR had discussed the coupon washing measure with the International Monetary Fund (IMF). But the IMF was sceptical that people who buy government securities do not pay taxes. Additionally, the committee approved raising the cash withdrawal threshold for non-filers — subject to a 0.8% tax — from Rs50,000 to Rs75,000. However, it rejected the FBR's recommendation to increase the tax rate to 1%, which had been 0.6% before the budget proposal.
Business Recorder
03-06-2025
- Business
- Business Recorder
Aurangzeb outlines Pakistan's digital financial initiatives
ISLAMABAD: Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, virtually addressed the meeting of the Shanghai Cooperation Organisation (SCO) Finance Ministers and Central Bank Governors, held in Beijing, China, on June 3. Due to the ongoing annual budget session in Pakistan, the minister was unable to travel to China but participated in the meeting via video conference, reaffirming Pakistan's strong commitment to the SCO's economic cooperation agenda. In his address, the finance minister expressed appreciation to the Government of the People's Republic of China for hosting the meeting and reaffirmed Pakistan's dedication to the vision and principles of the SCO. Structural reforms position Pakistan for sustainable growth, says Aurangzeb He emphasised that the SCO is an essential platform for promoting regional cooperation, enhancing economic ties, and working towards shared prosperity, in line with the 'Shanghai Spirit' and the SCO Charter. The minister highlighted Pakistan's ongoing efforts to strengthen economic cooperation within the SCO framework, calling for increased collaboration in trade, investment, and financial integration. He proposed initiatives such as joint ventures, technology transfer, and capacity-building programmes that could deliver mutual benefits to all member states. Recognising the growing importance of the digital economy, he outlined Pakistan's digital financial initiatives aimed at promoting inclusion and expanding access to capital. He pointed to programmes such as Roshan Digital Accounts and digital banking platforms, which have shown notable success in widening access to financial services. The finance minister stressed that the global economy is currently facing multiple challenges, including sluggish growth, rising inequality, and climate change. He underscored the need for collective action among SCO member states to address these issues and to ensure that the benefits of sustainable development are equitably shared among all countries in the region. He noted that SCO member states can learn from one another's experiences and successful policy models, especially those tailored to the unique needs of the developing world. Pakistan remains fully supportive of regional initiatives that aim to deliver long-term, sustainable development outcomes. He further emphasised Pakistan's continued reform efforts which have led to notable macroeconomic stability and laid the foundation for sustainable and inclusive economic growth. These reforms, particularly in the areas of fiscal discipline, improvements in key economic indicators, reduction of the current account deficit, exchange rate stabilisation, and increased investor confidence, were highlighted as examples of Pakistan's progress. The minister reiterated Pakistan's strong support for the establishment of the SCO Development Bank, describing it as a pivotal institution to support infrastructure financing, promote development, and deepen regional economic integration. He envisioned the Bank as forward-looking, incorporating digital finance, fintech innovation, and green financing tools into its operations. Pakistan looks forward to actively contributing to the technical discussions surrounding its establishment. He also welcomed the operationalisation of the SCO Network of Financial Think Tanks, recognising it as a timely initiative that will foster evidence-based research, strategic foresight, and policy coordination among member states. Earlier in the meeting, China's Minister of Finance and the Governor of the People's Bank of China acknowledged Pakistan's economic progress and commended the Government of Pakistan for successfully stabilising the economy and advancing its reform agenda. In conclusion, Senator Aurangzeb reiterated Pakistan's unwavering commitment to deepening economic cooperation under the SCO framework. He expressed confidence that continued collaboration and mutual support among SCO member states would help unlock regional economic potential, promote resilience, and ensure a more inclusive and sustainable future for the entire region. He thanked all participating countries for their constructive engagement and once again expressed his appreciation to the Government of the People's Republic of China for hosting this important meeting. Copyright Business Recorder, 2025
Business Recorder
03-06-2025
- Business
- Business Recorder
Structural reforms position Pakistan for sustainable growth, says Aurangzeb
Finance Minister Muhammad Aurangzeb on Tuesday said that the ongoing structural reforms have 'well-positioned' Pakistan for sustainable growth. He made these remarks during a virtual address at the Meeting of Ministers of Finance and Chairmen of Central (National) Banks of SCO Member States, held in Beijing, China. Aurangzeb shared that he had a desire to participate in the meeting in person, but due to the ongoing annual budget session in Pakistan, the minister was unable to travel to China. In his address, the finance minister highlighted Pakistan's recent macroeconomic indicators, including a 'current account surplus, primary surplus on the fiscal side, a stable currency on the back of growing FX reserves and inflation at a multi-year low'. He added that credit rating agencies have upgraded Pakistan's sovereign rating. 'This is on the back of structural reforms, which are well underway in sectors, i.e. taxation, SOE, energy and in the public finances. We are committed to staying the course and will be well-positioned for sustainable growth in the coming year.' The finance minister reaffirmed Pakistan's dedication to the vision and principles of the Shanghai Cooperation Organization (SCO). He emphasised that the SCO is a vital platform for promoting regional cooperation, enhancing economic ties, and working towards shared prosperity, in line with the 'Shanghai Spirit' and the SCO Charter. The minister highlighted Pakistan's ongoing efforts to strengthen economic cooperation within the SCO framework, calling for increased collaboration in trade, investment, and financial integration. He proposed initiatives such as joint ventures, technology transfer, and capacity-building programs that could deliver mutual benefits to all member states. Recognising the growing importance of the digital economy, he outlined Pakistan's digital financial initiatives aimed at promoting inclusion and expanding access to capital. He pointed to programs like Roshan Digital Accounts and digital banking platforms, which have shown notable success in widening access to financial services. The finance minister stressed the need for joint solutions to address major issues such as the global economic slowdown, growing economic disparities, rising wave of protectionism and climate change and called for the adoption of a sustainable development that benefits all member states. 'Pakistan believes that SCO member states can learn from each other's experiences and best practices in addressing these challenges in the global south,' he said. The Senator highlighted the importance of infrastructure development and regional connectivity in enhancing economic growth and supported measures to improve transport, energy and digital connectivity in the region. The minister reiterated Pakistan's strong support for the establishment of the SCO Development Bank, describing it as a pivotal institution to support infrastructure financing, promote development, and deepen regional economic integration. He envisioned the Bank as forward-looking, incorporating digital finance, fintech innovation, and green financing tools into its operations. 'We look forward to engaging on the technical details on the establishment of the SCO Development Bank,' he said. The finance minister also welcomed the operationalisation of the SCO Network of Financial Think Tanks, and was hopeful that it would serve as an 'excellent platform for research, analysis and strategic foresight in our financial cooperation'. In conclusion, the finance minister reiterated Pakistan's commitment to enhancing economic cooperation within the SCO framework. 'We believe that our collective endeavours will promote economic prosperity, stability and sustainable development in our region,' he said.
Express Tribune
24-02-2025
- Business
- Express Tribune
Banks for Prosperity
BOP's President Zafar Masud with LCCI officials and BOP's senior management at the inauguration of booth. PHOTO: EXPRESS As Pakistan moves toward economic stability, the banking sector plays a crucial role in shaping its future. This synergy will be central to the Pakistan Banking Summit, the first of its kind, being held in Karachi on February 24-25, 2025. Organized by the Pakistan Banks Association (PBA) with national banks and supported by Finance Minister Senator Muhammad Aurangzeb, the summit will align the financial sector with national priorities, foster dialogue, and dispel misconceptions about banking. Over the past three decades, Pakistan's banking industry has evolved from state control and financial instability to a resilient, privatized system. The PBA has driven this transformation, working with the State Bank of Pakistan (SBP) to enhance digital banking, cybersecurity, taxation policies, and financial sustainability. With 100 million unbanked individuals, expanding financial access is vital. Initiatives like Roshan Digital Accounts, Raast Payment System, and Asaan Digital Accounts have extended banking services to overseas Pakistanis and marginalized groups. Branchless banking, mobile wallets, and digital payments have reached remote areas, integrating them into the formal economy. Banks are also increasing credit flow to agriculture, SMEs, and renewable energy, aligning with government initiatives like solarizing tube wells and livestock financing. Climate-resilient projects, sustainable farming, and water conservation efforts further support economic and environmental stability. Contrary to popular belief, banks do not exclusively serve large corporations. Microfinance, SME lending, and financial literacy programs have significantly expanded. Additionally, banks are critical in mobilizing savings, financing infrastructure, and supporting government-led economic initiatives beyond mere profit-making. Navigating Interest Rates & Savings With interest rates declining, the challenge lies in balancing borrowers' and depositors' needs. Lower rates boost credit access but impact savers, pensioners, and retirees reliant on deposits. Enhancing Pakistan's national savings rate is crucial for sustained economic growth, as seen in successful economies worldwide. The Pakistan Banking Summit is a landmark event, highlighting banking's resilience and future challenges. By fostering collaboration among banks, policymakers, and industry leaders, the conference will reinforce banking's role as a driver of economic progress and national prosperity.
