Remittances stay strong despite incentives cut

By Shahid Iqbal
Published in Dawn on September 09, 2025

KARACHI: Remittances sent by overseas Pakis­tanis have remained robust despite the rationalisation of incentives for banks and exchange companies.

According to the State Bank of Pakistan (SBP), remittance inflows in the first two months of FY26 rose by 7pc, dispelling fears that a reduction in incentives would lead to a decline in remittances.

In August, remittances totalled $3.137 billion, showing a 6.6pc year-on-year increase. However, the monthly inflows saw a slight decline of 2.4pc compared to July, when they were $3.214bn.

While the growth in the first two months of FY26 is positive, it pales in comparison to the remarkable growth witnessed during the same period last fiscal year. Remittances surged by 44pc in 2MFY25 compared to FY24. This extraordinary growth contributed to a record annual total of $38.3bn, which helped maintain exchange rate stability and allowed the SBP to increase its foreign reserves by $7.8bn, reaching $14.5bn.

The government does not expect remittance growth to match the record levels of FY25 but remains hopeful that total inflows will reach around $40bn in FY26.

Inflows rose 6.6pc to $3.13bn in Aug

Despite these expectations, remittances from regions outside the Middle East have shown a decline. Inflows from major destinations like Saudi Arabia, the UAE, and GCC countries accounted for about 55pc of total remittance inflows during July-August FY26.

The inflows from Saudi Arabia amounted to $1.56bn, reflecting a modest growth of just 6pc, compared to a 50.7pc increase during the same period last year. Remittances from the UAE grew by 13.8pc, down significantly from the 84.3pc growth recorded in the first two months of FY25, totalling $1.308bn.

In contrast, inflows from other GCC countries reached $600 million, showing a growth of 5.3pc.

Meanwhile, remittances from the UK and USA showed a decline, with the former down by 0.5pc to $913.7 million, and the latter down by 13.7pc to $537 million. On a positive note, remittances from the European Union (EU) continued to grow, increasing by 18pc to reach $857 million in the first two months of FY26.Financial experts emphasise the need for remittances to remain strong throughout FY26 to maintain a current account surplus and preserve the stability of the exchange rate.

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