Pakistan’s remittances hit record $38.3 bn in FY25, economists warn of rising dependence

New Delhi, Jan 14 Remittances sent home by overseas Pakistanis touched a record high of $38.3 billion in FY25, rising by more than 26 per cent from the previous year, according to data released by the State Bank of Pakistan.

The sharp rise has provided much-needed support to Pakistan’s foreign exchange reserves and helped boost household spending at a time when the economy continues to face multiple challenges.

The inflows from overseas Pakistanis have now become larger than the country’s merchandise exports, which grew only modestly to about $32.3 billion in FY25, as per Daily Times report.

Economists see this as a sign of a deeper structural imbalance in Pakistan’s economic model, where money sent from abroad is playing a bigger role than earnings from trade and industry.

Experts point out that most remittances are used for day-to-day consumption rather than long-term investment.

While this supports families and keeps the economy moving in the short term, it does little to strengthen industries, expand exports or improve productivity.

Over time, heavy dependence on remittances can also keep the real exchange rate overvalued, making locally produced goods less competitive and widening the trade deficit.

The rising reliance on overseas income is also having social effects. Long periods of employment abroad often put pressure on family life, especially on children and spouses who stay back.

In areas where remittances are a major source of income, young people may prefer to migrate rather than build skills, start businesses or seek opportunities at home, weakening local economic activity.

Uneven distribution of remittance inflows across regions can further increase social and economic inequality.

There are political implications as well. Families supported by remittances are often able to access private healthcare, education and other services, which can reduce public pressure on the government to improve service delivery.

This, analysts warn, may lead to policy complacency and slow down much-needed institutional reforms.

Economists stress that remittances remain extremely valuable and reflect the hard work and sacrifices of millions of Pakistanis living abroad.

However, they caution that these inflows should not become a long-term substitute for economic reform.

For sustainable growth, Pakistan needs to use remittances more strategically by encouraging investment, reviving exports and strengthening domestic industries.

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