The significance of remittances from overseas Pakistanis cannot be overstated in the country, especially during periods of economic uncertainty marked by recurring trade deficits, energy shortages, high foreign debt repayments, and continuous balance of payment crises. These remittances continue to serve as a vital source of income for Pakistan, particularly during the ongoing fiscal year FY24, when the economy faced challenges of growth crisis and dwindling foreign exchange reserves.
According to the latest data from the State Bank of Pakistan, remittances surged by 28 percent year-on-year to reach $2.8 billion in April 2024, marking the second-highest monthly inflow since August 2022, with the previous month seeing $2.9 billion. Cumulatively, remittances in the first 10 months of FY24 witnessed a modest growth of 3.5 percent year-on-year, totaling $23.8 billion. This growth is an improvement compared to the previous nine months where remittances rose by less than one percent year-on-year, with particularly weak inflows in the first half of FY24.
Analysis of remittance data reveals that the majority of remittances to Pakistan originate from the Gulf region, the US, and the UK, reflecting the migration patterns of Pakistani emigrants and labor migrants. Despite challenges faced by overseas residents in the Gulf region due to nationalization policies and fluctuating oil prices, Saudi Arabia remains the primary contributor to remittances, accounting for 24 percent of total remittances in FY23 and 10MFY24. The UAE and the UK followed suit in the ongoing fiscal year, with shares of 18 percent and 15 percent, respectively.
The crackdown on informal remittance channels has contributed to the stability of official remittances. Additionally, the recent growth in remittances can be attributed to the observance of Ramadan and Eid-ul-Fitr, during which individuals typically send money back home for family support and charitable purposes. Remittance flows are expected to remain elevated in the coming months, especially with the approaching Eid-ul-Azha, traditionally a time when overseas Pakistanis send money for sacrificial animals and related festivities. With this outlook, remittances for FY24 are projected to reach between $29 to $30 billion, representing a year-on-year growth of 6-9 percent.
