By Azam Tariq

Pakistan’s workers’ remittances increased to $40.2 billion in 2025, providing critical support to the external sector, according to the Financial Stability Review 2025 released by the State Bank of Pakistan (SBP).

The report notes that the strong inflow of remittances played a key role in containing the current account deficit despite a widening trade gap during the year. Higher inflows from overseas Pakistanis helped offset pressures arising from imports of goods and services, thereby contributing to external sector stability.

Remittances have remained one of the most stable sources of foreign exchange for Pakistan, and their continued growth in 2025 reinforced the country’s external buffers. The SBP highlighted that improved confidence in formal financial channels, along with policy measures to facilitate overseas Pakistanis, contributed to sustaining inflows through official channels.

The increase in remittances also supported exchange rate stability by easing pressure on the foreign exchange market. With stronger inflows, the central bank was able to build reserves through strategic purchases from the interbank market, further strengthening the country’s external financial position.

The report indicates that inflows were supported by better economic conditions in key host countries, particularly in the Gulf region, which remains a major source of remittances for Pakistan. Continued demand for labor and gradual economic recovery in these economies helped sustain remittance flows during the year.

In addition to supporting the balance of payments, remittances also contributed to domestic economic activity by boosting household incomes and consumption. Increased inflows improved liquidity in the banking system and supported financial sector stability by strengthening deposit growth.

The SBP noted that initiatives such as Roshan Digital Accounts continued to enhance engagement with overseas Pakistanis, encouraging them to channel funds through formal banking systems. These measures helped improve transparency and efficiency in remittance transfers.

Despite the strong performance, the report cautioned that remittance inflows remain vulnerable to external risks, including changes in global economic conditions, labor market trends in host countries, and geopolitical developments. Any slowdown in these economies could impact future inflows.

Sustaining remittance growth will depend on continued policy support, improved financial infrastructure, and the need for maintaining confidence among overseas Pakistanis in formal financial channels.

Credit: INP-WealthPk