Farooq Awan

Workers’ remittances to Pakistan recorded a strong increase during the first half of FY2026, rising by 10.6 percent to $19.7 billion in Jul–Dec, providing critical support to the country’s external sector amid rising import demand, according to the Monthly Economic Update and Outlook issued by the Finance Division.

Official data show that the growth in remittance inflows marked a continuation of the positive trend observed over the past several quarters, reinforcing their role as a key source of external financing. The higher inflows helped cushion pressures on the balance of payments during a period when the current account shifted into a deficit due to a widening trade gap.

Country-wise data indicate that Saudi Arabia and the United Arab Emirates remained the largest sources of remittances during Jul–Dec FY2026. Inflows from Saudi Arabia accounted for a 23.9 percent share of total remittances, while remittances from the UAE contributed 20.7 percent. The sustained strength of inflows from the Gulf region reflects the continued overseas employment of Pakistani workers and stable labour market conditions in host countries.

Monthly trends also showed improvement in remittance inflows. In December 2025 alone, remittances reached $3.59 billion, representing a 16.5 percent increase compared to $3.08 billion recorded in December 2024. The increase highlighted the resilience of remittance flows despite global economic uncertainties and moderating growth in some advanced economies.

The Finance Division noted that robust remittance inflows have played a vital role in supporting Pakistan’s external account by offsetting part of the increase in imports and reducing reliance on external borrowing. The steady inflows also contributed to the buildup of foreign exchange reserves, which stood at $21.3 billion as of mid-January 2026.

Remittances have remained particularly important during FY2026 as import demand picked up in line with recovering economic activity. Higher inflows helped stabilise the exchange rate and supported confidence in the external sector, even as the current account recorded a deficit during the first half of the fiscal year.

The report also highlighted the broader economic significance of remittances beyond their impact on the balance of payments. Remittance inflows provide direct income support to households, particularly in rural and semi-urban areas, helping to sustain consumption and mitigate the impact of inflationary pressures. The continued growth in remittances during FY2026 has therefore contributed to both external stability and domestic economic resilience.

According to the Finance Division, remittances are expected to remain a key pillar of external sector support in the coming months, provided overseas employment trends remain favourable and global economic conditions do not deteriorate sharply. The report indicated that steady inflows, combined with growth in services exports, are likely to help cushion external pressures despite the projected continuation of a current account deficit.

The sustained rise in remittances during Jul–Dec FY2026 underscores their central role in Pakistan’s economic framework, particularly at a time when external financing needs remain elevated and export growth faces structural challenges.

Credit: INP-WealthPk