Pakistan has received a significant boost in remittances, with a total of $30.3 billion flowing into the country in the fiscal year 2024, marking an increase of 10.7% compared to the previous year. This surge in remittances has exceeded the earnings from exports, highlighting the growing dependence of the economy on overseas Pakistanis.
According to the State Bank of Pakistan, the total remittances in FY24 stood at $30.3 billion, up from $27.3 billion in FY23. The growth in remittances is a welcome sign for the government, which has been struggling to manage the current account deficit. The deficit narrowed down to $464 million during the first 11 months of FY24, a significant improvement from the previous year.
The increase in remittances can be attributed to the stability in the exchange rate, which has remained stable for over four months. This stability has boosted confidence in the economy, leading to higher inflows from major destinations such as Saudi Arabia, the UAE, the UK, and the US. Saudi Arabia remained the largest source of remittances, with inflows totaling $7.424 billion, a growth of 13.6% compared to FY23.
The UAE followed closely, with remittances rising by 18.9% to $5.534 billion. The UK and the US also saw significant growth, with remittances increasing by 11% to $4.521 billion and $3.531 billion, respectively. Other countries, including Italy, also saw an improvement in remittances, with an increase of 16.5% to $978 million.
While the growth in remittances is a positive sign, financial experts have cautioned that the economy’s increasing dependence on remittances could be disastrous if exports start declining. Exporters have been struggling with fresh taxes and increasing power rates, which have made the cost of doing business uncompetitive in the international market.
Prime Minister Shehbaz Sharif has acknowledged the challenges facing the economy and has urged the nation to “swallow more bitter pills” to secure IMF loans. The government is under pressure to implement structural reforms and reduce the fiscal deficit to secure the loan.
In conclusion, the surge in remittances is a welcome sign for Pakistan’s economy, but it also highlights the need for the government to diversify its sources of income and implement structural reforms to reduce the dependence on remittances.
