KARACHI: Remittances from Pakistani workers employed abroad increased to $3.6 billion in December, a 16.5 per cent rise year-on-year (YoY) and up 12.6 per cent compared to the previous month, the central bank said on Friday.
Money sent to Pakistan by immigrants working outside the country increased by 10.6 per cent to $19.7 billion in the first six months of fiscal year 2026.Monthly remittance inflows remained above $3 billion for nearly a year, supporting the country’s economic recovery under a $7 billion loan programme backed by the International Monetary Fund (IMF). These inflows have also aided the external current account.
Multiple factors contributed to the increase in remittances, including the increased utilisation of formal channels for transferring funds to Pakistan, largely due to a crackdown on hawala and hundi networks, which has considerably reduced the grey-market premium. Additionally, favourable employment trends in overseas markets, particularly in Gulf Cooperation Council (GCC) countries, have benefited Pakistani workers, as labour demand and construction activities continue to thrive.
A recent report from Ismail Iqbal Securities Limited noted that stricter controls on speculative dollar buying, enhanced know your customer (KYC) requirements, and closer scrutiny of frequent foreign exchange transactions have increased trust in the banking system while reducing arbitrage incentives. Banks have also played a crucial role in driving formal inflows, with several institutions quietly improving rebate structures for overseas partners, introducing volume-based incentives, and aggressively promoting digital remittance channels.
“With stronger regulatory oversight, rising digital adoption and expanding overseas labour deployment, Pakistan remains on track for another year of elevated remittance inflows,” the report said.
The SBP expects remittances to exceed $41 billion in FY26, up from the FY25 level of $38 billion, and anticipates the current account deficit to be in the range of 0-1 per cent of GDP during the same fiscal year.
Despite the advantages of remittances, renowned Pakistani-American economist Atif Mian argued in the article last month that while remittances are vital for Pakistan, if they are not managed properly, they can hinder growth. He stated that when remittances are as significant as they are in Pakistan, their macroeconomic effects cannot be overlooked, as they increase consumption and spending power more quickly than the economy’s productive capacity. Additionally, the steady inflow of dollars tends to appreciate the rupee in real terms, which disproportionately affects the more productive, export-oriented tradable sector. According to Mian, the export sector in Pakistan has steadily weakened as remittances have become more dominant. The exchange rate has been overvalued for extended periods, and Pakistan’s investment-to-GDP ratio is notably low, indicating an unusually high consumption-to-GDP ratio compared to other countries at a similar income level.
