Remittances rise; dependence deepens

Pakistan’s remittance momentum has carried into FY27. Workers’ remittances reached USD3. 66 billion in Aug-26, rising 16. 5 percent year-on-year and 0. 7 percent from Jul-26. Cumulative inflows during 2MFY27 stood at USD7. 29 billion, up 14. 7 percent year-on-year. This follows a record USD41. 6 billion received in FY26. In August, the increase was broad-based. Saudi Arabia remained the largest source, with contribution up 18. 6 percent year-on-year but down 4. 4 percent from July. Remittances from UAE were up 16. 6 percent year-on-year, while inflows from the UK rose 21. 6 percent. Remittances from the EU was up 14. 6 percent year-on-year, while remittances from the US increased by 15. 6 percent. The stronger performance of the UK and EU is encouraging because it provides some diversification beyond Pakistan’s traditional Gulf corridors. Even so, the Gulf remains the backbone of Pakistan’s remittance economy. Saudi Arabia, the UAE and other GCC countries together contributed around USD1. 95 billion—or more than half of all inflows—in Aug-26. The four largest individual corridors—Saudi Arabia, the UAE, the UK, and the US—accounted for over two-thirds of the monthly total. This concentration is both a strength and a risk. The large Pakistani workforce in the Gulf provides a reliable flow of foreign exchange, but it also leaves the country exposed to oil-price cycles, localisation policies, visa restrictions, and regional security conditions. More than 96 percent of Pakistani workers registered for overseas employment in 2025 went to GCC countries, with many entering low- and semi-skilled occupations. For now, remittances are once again doing the heavy lifting for the external account. But the latest data are also reassuring because they follow an important change in the remittance regime. From Jul-26, the SBP discontinued two remittance incentive schemes, including the reimbursement of eligible transfer charges. Formal remittances remain free for senders and recipients, while banks are expected to absorb the cost. Strong inflows in the first two months suggest that the transition has not caused an immediate disruption. But banks will need to keep transfers fast, simple, and competitive. Any deterioration in service or increase in hidden costs could push part of the flow back towards hundi and hawala. While some of the increase may reflect a continuing shift from informal to formal channels rather than an equivalent rise in migrant incomes, remittances have also become more important partly because exports, foreign investment and domestic job creation have remained weak. They are increasingly compensating for structural weaknesses in the domestic economy. Remittances remain Pakistan’s strongest external cushion, but they are not a substitute for exports, investment, or productivity. The real success will be to keep these flows formal and reliable while gradually converting part of the country’s diaspora wealth into productive capital.

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