Remittances Surpass Exports in Pakistan Fiscal Year 2024-25

Pakistan's overseas workers’ remittances have exceeded export earnings during the first half of fiscal year 2024-25, signaling a shift in foreign exchange inflows despite the government's efforts to boost exports.

According to data from the State Bank of Pakistan (SBP), remittances reached $17.645 billion, surpassing exports, which stood at $16.561 billion, with a difference of $1.084 billion. This trend of remittances consistently outpacing exports was evident in monthly figures.

In July, exports amounted to $2.307 billion compared to $2.994 billion in remittances. Similarly, August saw exports at $2.762 billion, while remittances reached $2.942 billion. This pattern continued, with remittances exceeding exports by $0.015 billion in September, $0.070 billion in October, $0.082 billion in November, and $0.238 billion in December.

Economists suggest the surge in remittances can be attributed to several factors, including a crackdown on informal remittance channels like Hawala and Hundi under the FATF framework, enhanced monitoring by the SBP, and a narrowing of the exchange rate gap between the open market and interbank rates.

On the export front, industry experts have criticized tax policies, claiming they unfairly disadvantage local value chains. They pointed out inconsistencies in the Export Financing Scheme (EFS) and tax exemptions for imports not manufactured locally.

The National Export Development Board (NEDB), led by Prime Minister Shehbaz Sharif, has instructed the Commerce Ministry to address exporters’ concerns, including raising the EFS limit beyond Rs230 billion. However, the Finance Division has resisted these suggestions, citing the SBP’s transition plan under the IMF to phase out the EFS and shift it to Exim Bank