How record $38.3 billion remittances in FY 25 are reshaping Pakistan’s financial landscape

By Alizay N. PakUpTech | May 2025

Pakistan has hit a historic milestone: remittances from overseas workers reached a record $38.3 billion during fiscal year 2025. 

The Express Tribune

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 These inflows are now acting as a critical stabiliser for the country’s external accounts — but they also come with a set of risks that could challenge long-term economic resilience.

What’s driving the surge? A few factors stand out. First, many overseas Pakistanis are using formal digital channels, such as Roshan Digital Accounts, which streamlines remittance flows and increases transparency. 

The Express Tribune

 Second, improving economic conditions in the Gulf, a major source of remittances, have helped boost income levels for migrant workers. 

The Express Tribune

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 There’s also a growing role for exchange companies: they contributed around $5 billion of remittances in FY 25, according to the Exchange Companies Association of Pakistan. 

Dawn

The immediate economic benefits are clear. These remittances helped to augment Pakistan’s foreign currency reserves, providing much-needed breathing space for its balance of payments. 

The Express Tribune

 For a country that has struggled with capital outflows and external financing constraints, this stability is vital. On top of that, remittance inflows strengthen household incomes — many families rely on this money for daily expenses, savings, and investment in education or small businesses.

But there’s a risk side too. Remittance inflows can be volatile — as seen in June 2025, when inflows dropped by about 8% month-on-month. 

The Express Tribune

 This type of variability can create challenges for macro-economic planning: if policymakers start depending too heavily on remittances, they may be exposed when flows contract.

Another concern is dependency. When an economy becomes too reliant on remittances, it can divert attention from building stronger export sectors or cultivating foreign investment. Remittances may provide a cushion, but they don’t necessarily drive industrial development or structural change in the productive economy.

There’s also a potential social side effect. As workers abroad send more money home, some local fiscal pressures may ease — but wage growth and employment quality at home can stagnate if capital isn’t channelled into job-creating industries. Balancing remittance inflows with domestic investment will be critical if Pakistan wants sustainable growth.

Then there’s policy risk. The State Bank of Pakistan and the government need to ensure that incentives for remittance inflows don’t distort the market. For example, incentives for formal channels like Roshan Digital Accounts are excellent, but there must be guardrails to prevent excessive speculation or systemic risk from overly large foreign currency holdings.

Here’s what this all means: the record remittances of FY 25 are a powerful lever for Pakistan’s economy today. They provide external support, improve household resilience, and lend credibility to the country’s macro outlook. But for this to turn into long-term strength, Pakistan needs to channel this resource wisely — diversifying into exports, building human capital, and investing in productive sectors.

The real question now is whether policy-makers will lean on remittances as a crutch or use them as a springboard. If they play it well, this inflow could be a foundation for more resilient, inclusive growth — not just a temporary financial cushion.