EDITORIAL: Home remittances July-August 2025 rose to USD 6.35 billion against USD 5.94 billion in the comparable period of the year before.
Clubbing these two months provides a percentage increase of 7 percent in the current year as opposed to the two months in 2024; however, the August 2025 inflow is USD 76.6 million less than USD 3,214.5 million inflow in July 2025 — 2.3 percent lower.
Be that as it may, remittances are clearly on the rise compared to previous years with 2024-25 inflow soaring to USD 38.3 billion when compared to fiscal year 2023-24’s total of USD 30,250.8 million — a rise of 27 percent and have assumed a pivotal role as the country’s source of desired foreign exchange earnings last fiscal year, surpassing USD 32.3 billion of exports in 2025. Besides a part of our exports require import of raw materials, which contributed to the negative trade balance.
The Pakistan Remittance Initiative (PRI) undoubtedly contributed to the rise in remittance inflows and in this context it is relevant to note that the cost of funding this scheme has risen from 72.95 billion rupees in 2024 to 124.14 billion rupees in 2025 — a 70 percent rise — which includes raising the number of financial institutions on the PRI network from 25 in 2009 to more than 50 in 2024 (inclusive of conventional banks, Islamic banks, microfinance banks and exchange companies) and allowing electronic money institutions to receive remittances by working through banks.
The budget for the current year approved by the International Monetary Fund envisaged the removal of these incentives, however, Prime Minister Shehbaz Sharif directed that a supplementary grant of 30 billion rupees be provided to cover the subsidies — a directive that reversed the decision and must be appreciated.
Reports, however, suggest that the revision of the PRI is still under consideration with the objective of making the scheme sustainable by ensuring that the rise in payouts does not outpace the growth in remittances. In actual terms, the rise in the cost this past year compared to the year before was 51.9 billion rupees (less than USD 180 million) while the rise in remittance inflows has been USD 8.05 billion or, in other words, there is no comparison between the benefit that accrues from the PRI against its cost.
Remittances contribute to the country’s Gross Domestic Product by boosting consumption amongst the recipient households. In Pakistan it is unclear whether remittances are invested in productive sectors though there is evidence that they are used to purchase real estate and for construction. Pakistan has a remittance to GDP ratio of 7.85 percent.
Exports as noted above were lower than remittances in 2025; however, it is critical to keep a focus on exports because they generate not only employment opportunities within a country, Pakistan today is suffering from a 22 percent unemployment rate, but, like remittances, are also a desired form of earning foreign exchange for the country.
The IMF has barred the government from extending subsidies to exporters by arguing that “the business sector has failed to become an engine of growth, and the incentives eventually weakened competition and trapped resources in chronically inefficient (including perpetually “infant”) industries.”
This will increase our reliance on remittance inflows to reach a sustainable balance of payments position and any decline in these inflows at present, especially in the aftermath of the devastation caused by the floods, would simply exacerbate the dependence on foreign loans.
To conclude, one would hope that the government can successfully resist IMF pressure during the looming second review talks to withdraw subsidies for the PRI and exports till such a time as growth picks up.
Copyright Business Recorder, 2025
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