Steady Growth in Remittances Expected Amid Seasonal Trends, Says Finance Ministry
The Finance Ministry, in its latest monthly economic outlook, projected that remittances would continue their upward momentum, largely influenced by the seasonal trends surrounding Ramazan and Eid.
“The external sector has shown resilience, bolstered by a sustained rise in exports and a significant increase in remittances, despite growing import volumes,” the report stated. It further noted that these seasonal factors would assist in maintaining the current account at a sustainable level.
A significant improvement was observed in the current account deficit (CAD), which shrank to $12 million in February, compared to $420 million in January. Additionally, the country registered a surplus of $691 million in the initial eight months of FY25, a stark contrast to the CAD of $1.7 billion recorded in the same period last year.
Economic analysts credited this positive development to a 32% surge in remittances, emphasizing that inflows during Ramazan played a crucial role in stabilizing the exchange rate and supporting foreign exchange reserves.
Despite this progress, the central bank’s foreign reserves, which are set to reach $13 billion by the end of FY25, currently stand at approximately $11 billion.
The report highlighted a remarkable 32.5% growth in workers’ remittances, with inflows amounting to $24 billion between July and February of FY25, a significant increase from $18.1 billion in the corresponding period last year.
Saudi Arabia emerged as the leading contributor, accounting for 24.6% of the total remittances, followed by the UAE at 20.3%.
On the foreign direct investment (FDI) front, the report indicated a robust increase of 41%, with FDI reaching $1,618.4 million compared to the previous year.
China remained the largest contributor, investing $661.8 million (40.9% share), followed by the UK with 10.3% and Hong Kong at 9.9%.
The report outlined key sectors receiving FDI, with the power sector securing $578.2 million (35.7%), financial services attracting $466.4 million (28.8%), and oil & gas exploration receiving $196.6 million (12.1%).
Additionally, fiscal discipline has improved, with the budget deficit narrowing to 1.7% of GDP in July-January FY25, compared to 2.6% in the previous year.
Regarding trade performance, both exports and imports demonstrated an upward trend. The ministry reported that the country’s primary export destinations included the UK, the US, European nations, and China, all surpassing the 100 potential index level.
“Between July and February FY25, merchandise exports climbed by 7.2%, reaching $21.8 billion, compared to $20.4 billion last year. Meanwhile, imports rose by 11.4%, amounting to $38.3 billion,” the report stated.
Frequently Asked Questions (FAQs)
1. Why have remittances increased significantly in recent months?
Remittances have surged due to seasonal factors such as Ramazan and Eid, along with improved economic conditions in key remittance-sending countries.
2. How does the rise in remittances impact Pakistan’s economy?
Higher remittances help stabilize the exchange rate, improve foreign reserves, and support the balance of payments, leading to a more robust economic outlook.
3. Which countries contribute the most to remittance inflows?
Saudi Arabia leads with a 24.6% share of remittances, followed by the UAE at 20.3%.
4. What sectors are attracting the most foreign direct investment (FDI)?
The power sector receives the highest FDI at 35.7%, followed by financial services (28.8%) and oil & gas exploration (12.1%).
5. How has Pakistan’s trade sector performed recently?
Exports have grown by 7.2%, reaching $21.8 billion, while imports have increased by 11.4%, totaling $38.3 billion.
The continued rise in remittances plays a pivotal role in strengthening Pakistan’s economy and maintaining financial stability.
