ISLAMABAD — Pakistan’s home remittances reached a historic $38.3 billion in FY25, marking a 27 percent growth year-on-year and surpassing the combined value of goods and services exports. While this surge appears to be a significant win for the country’s external account stability, economists and analysts are cautioning against excessive dependence on these inflows.
The rise in remittances is attributed to a combination of higher formal channel usage, growing freelance income, and a crackdown on hundi/hawala networks, which previously diverted foreign currency through informal means.
Saudi Arabia remained the top remittance source, sending $9.4 billion, roughly a quarter of the total. Since 2011, over 4.4 million workers have migrated to Saudi Arabia and 2.8 million to the UAE. In 2024, 727,000 Pakistanis left for overseas employment, but only 30,000 were highly skilled, while 366,000 were unskilled—a trend that has stayed consistent since 2011.
Despite fewer workers going abroad during the COVID-19 years, remittances remained resilient. This suggests a disconnect between worker migration trends and remittance inflows, indicating the influence of other dynamics such as domestic freelancing and reverse capital flows from abroad.
The UAE posted the highest growth in remittances in FY24, with inflows rising 41% to $5.5 billion, even though the number of workers going there dropped sharply to just 65,000—the lowest since 2011, excluding pandemic years. Analysts believe this growth may stem from Pakistan-based firms registered in the UAE and a reversal of previously whitewashed funds now flowing through formal banking channels.
Another emerging trend is the rise of Oman as a labor destination, which saw 82,000 migrants from Pakistan in 2024—surpassing the UAE.
Faisalabad Chamber Warns of Protest Over Finance Bill 2025-26 Provisions
Experts warn that while remittances are vital for bridging the current account deficit, they also lead to a “Dutch Disease” scenario. Ahmad Jamal Pirzada, from the Economic Advisory Group (EAG), notes that districts with high remittance flows tend to have disproportionate employment in low-productivity sectors like construction, while industrial activity lags. This misallocation of labor fosters import-driven consumption, weakening the long-term economic structure.
Furthermore, the sustainability of remittance inflows depends on external factors such as oil prices and visa access. If Pakistan hopes to maintain or grow remittance inflows, it must keep oil prices above $50/bbl and work diplomatically to restore UAE visa allocations.
The State Bank of Pakistan and economic planners must balance this short-term relief with long-term policy direction. Remittances cannot replace exports, which are critical for job creation, industrialization, and sustainable growth.
