Despite the projection of $38 billion in remittance inflows for the current fiscal year (FY25), Pakistan’s per expatriate remittance continues to lag behind that of its regional counterparts. According to a report released by the Policy Research and Advisory Council (PRAC), while remittances have grown at an annual rate of 6.1% from 2013 to 2023, the amount received per expatriate remains significantly lower.
The report highlighted that Pakistan’s per expatriate remittance stood at $2,529 in 2023, far behind countries like the Philippines ($16,780), Thailand ($9,703), Mexico ($5,914), China ($4,626), and India ($3,906).
While the inflow of remittances is projected to reach $38 billion in FY25, the report attributes this volatility to several structural challenges, such as a narrow export base heavily reliant on textiles, a persistent trade deficit, increasing imports of consumer goods, a depreciating rupee, and modest remittance inflows.
The report also reviewed recent policy measures such as the Roshan Digital Account (RDA) and Naya Pakistan Certificates (NPCs), which have contributed to mobilizing remittances and foreign investments. However, the report notes that the benefits of these initiatives have been primarily concentrated in sectors like real estate, with limited impact on industrial or agricultural productivity.
To address these challenges, PRAC has recommended several reforms, including adjusting yields on investment certificates, reducing remittance transfer costs, and directing RDA inflows toward special economic zones (SEZs) and agro-processing.
The report also suggests simplifying regulations on corporate foreign currency accounts and shifting towards a managed-float or “peg-and-revalue” exchange rate regime, anchored to the Real Effective Exchange Rate (REER), to improve currency competitiveness and reduce volatility.
The report also examined Pakistan’s foreign exchange reserves, noting that they have fluctuated considerably, influenced by global factors such as oil price volatility and internal factors like political instability. For instance, the country’s forex reserves dropped sharply from $23.5 billion in 2016 to just $11.3 billion in 2023, barely covering three weeks’ worth of imports.
The proposed measures aim to strengthen Pakistan’s foreign exchange management and create a more resilient economy, fostering sustainable, export-led growth. The report emphasizes that a dynamic approach to reserves management is crucial to mitigate the impact of oil price spikes, political instability, and other external shocks.
