Govt raises remittances target to $42.4bn for FY27 despite Middle East tensions

The federal government has set a higher remittances target of $42.4 billion for FY2026-27, betting on continued strong inflows from overseas Pakistanis despite ongoing tensions in the Middle East, the country’s largest source of workers’ remittances.

Budget documents show that the current account deficit (CAD) is projected to widen to $3.6 billion, or 0.7% of GDP, in the next fiscal year. The projected CAD is significantly higher than the revised target of $1.1 billion, or 0.2% of GDP, for FY2025-26.

The government expects exports to reach $32.9 billion in FY27, while imports are projected at $70 billion, resulting in a trade deficit of $37.1 billion.

The wider trade gap is expected to put pressure on the external account after Pakistan's trade deficit reached $35 billion during the first 11 months of FY26.

Despite the higher deficit projection, the government remains optimistic about remittance inflows, setting a target of $42.4 billion for FY27 compared with $41.3 billion for FY26.

According to the State Bank of Pakistan, remittances during July-May FY26 rose 9.2% to $38.109 billion from $34.829 billion in the corresponding period of the previous fiscal year.

Remittance inflows remained resilient despite concerns over the conflict in the Gulf region. In May alone, Pakistan received a record $4.3 billion in workers' remittances.

The government had earlier revised its FY26 remittance target from $41.3 billion to $40 billion following the outbreak of the Gulf conflict on February 28. However, inflows continued to exceed expectations.

Remittances from the Middle East increased by around $1 billion to $20 billion during the first 11 months of FY26, helping offset the impact of the widening trade deficit.

The strong inflows also supported external debt repayments and contributed to an improvement in the State Bank's foreign exchange reserves.

According to official data, Pakistan recorded a current account deficit of $252 million during July-April FY26, compared with a surplus of $1.662 billion in the same period a year earlier.

Analysts believe Pakistan can achieve the FY27 remittance target, noting that inflows have remained strong despite geopolitical tensions in the Gulf region.