H1 remittances surpass export earnings

ISLAMABAD: Pakistan’s overseas workers’ remittances surpassed the country’s export earnings in the first half of the fiscal year 2024-25, despite the Prime Minister’s special focus on boosting exports.

Official figures reveal that remittances for the first half of the current fiscal year totalled $17.645 billion, whereas exports amounted to $16.561 billion— a gap of $1.084 billion.

In July 2024, exports were $2.307 billion while remittances stood at 2.994 billion; in August exports were $ 2.762 billion, remittances $ 2.942.8 billion; in September exports 2.840 billion and remittances $ 2.859.5 billion, in October exports were $ 2.984 billion and remittances, $ 3.054.6 billion, in November exports were $ 2.833 billion and remittances $ 2.915.3 billion while in December exports were $2. 841 billion and remittances were $3.079.3 billion.

Pakistan’s remittance inflow at $3.1bn in December 2024, up 6% month-on-month

Economists maintain that industrial competitiveness has weakened as growth has been less as compared to regional countries brought about by severely contractionary fiscal and monetary policies under the ongoing International Monetary Fund (IMF) programme.

“High number of people are leaving Pakistan for better employment, narrow and stable difference between open market and interbank, strict enforcement of SBP and LEAs on illegal currency trading (hawala/ hundi) and incentives for workers to send remittances via official channels are the reasons behind an upsurge in remittances,” said Tahir Abbas, analyst working for Arif Habib Securities.

An official stated that the major reasons for the increase in Pakistan’s remittances are: (i) the government has enhanced monitoring under the FATF (Financial Action Task Force) framework and conducted a crackdown on exchange companies involved in informal remittance channels like Hawala and Hundi, driving remittances through formal systems upward; (ii) narrowing of the gap between the open market and inter-bank exchange rates has incentivized expatriates to send money through official banking channels, increasing recorded remittances; (iii) In post-COVID period, there has been a significant rise in migration, particularly to the Middle East and Europe, contributing to higher remittance inflows; and (iv) economic recovery in key remittance-sending regions, such as the Middle East and Europe, has led to better job opportunities for Pakistani workers, allowing them to send more money back home.

However, former Commerce Minister Gohar Ejaz argues that exports will not grow unless the Federal Board of Revenue (FBR) revises its discriminatory policies toward local value chains in comparison to imports from China, which are exempt from GST.

Ejaz pointed out that while the FBR collects tax on imports, it refunds the tax under the Export Financing Scheme (EFS). However, imported goods that are not manufactured locally are tax-free. He questioned whether this system could continue internationally, adding, “It would have been fair if imported goods that are not locally manufactured were tax-free, as it would facilitate non-traditional exports. However, when locally available raw materials are taxed, but the same imported raw material is exempt, it is just unfair.”

He further criticised the government for undermining the value chain of Pakistan’s $20 billion downstream industry. Last year, agriculture supported exports but this year, textile sector would be the key contributor.

Pakistan’s textile is showing good results and reached $ 1.65 billion per month due to diversion of orders from Bangladesh and is currently hovering around $ 9.5 billion which was $ 8 billion during the same period last year.

Sources in Commerce Ministry lament as to how the Ministry can be held responsible for slow growth in exports against foreign workers’ remittances, when most of their budget proposals meant to facilitate exports have not been going through. However, export situation is being monitored by the Ministry and its reports are also being shared with the Prime Minister Office.

According to sources, Prime Minister while chairing a meeting of National Export Development Board (NEDB) had directed Commerce Ministry to resolve issue of exporters but nothing concrete has been done so far.

One of the issues was further enhancing limit of Export Financing Scheme (EFS) beyond Rs 230 billion. Finance Division had argued that SBP is phasing out EFS to Exim Bank under IMF plan. Finance Division further noted that Exim Bank is in the process of devising its term sheet for LTFF mark-up subsidy scheme, which will be shared with Exim Bank in due course for seeking necessary approval from the Government.

Recently, Commerce Minister, Jam Kamal presided over a meeting of Executive Committee of NEDB and directed his Ministry to urgently provide a written position on all pending issues so that the same may be presented to the Prime Minister in the third meeting of the NEDB.

He noted that with concern that replies on some of these issues were still awaited from the relevant ministries. While members of the NEDB are committed to spend their time and effort for the resolution of issues of exporters, the response from the concerned Ministries/ Departments is not encouraging. It was stated that unresolved issues will be placed in the NEDB and concerned Ministries will be asked to present their position.

Minister of State for Finance, Ali Pervaiz Malik, Advisor to Finance Minister, Khurram Shahzad and Chairman Federal Board of Revenue(FBR), Rashid Langrial did not respond to this correspondent’s query on the “main reasons for remittances over taking exports” till the filing of this report.

Copyright Business Recorder, 2025