Even though Pakistan’s remittance inflows are projected to reach $38 billion in the current fiscal year (FY25), the per capita remittance from overseas Pakistanis remains much lower than that of comparable nations.
According to a report released on Monday by the Policy Research and Advisory Council (PRAC), while remittances have grown at an average annual rate of 6.1% from 2013 to 2023, Pakistan’s per expatriate remittance remains notably lower than that of other regional countries.
In 2023, Pakistan’s per capita remittance stood at $2,529, far behind the Philippines ($16,780), Thailand ($9,703), Mexico ($5,914), China ($4,626), and India ($3,906), the report titled Strategic Management of Pakistan’s Forex Reserves: Boosting Exports and Investment Flows stated.
The report highlighted that Pakistan’s foreign exchange reserves have been volatile, impacted by external factors such as fluctuations in global oil prices, as well as internal political instability.
For example, forex reserves plummeted from $23.5 billion in 2016 to a critically low $11.3 billion in 2023, sufficient to cover only three weeks of imports.
The PRAC identified several structural challenges behind this volatility, including a narrow export base dominated by textiles, persistent trade deficits, rising imports of consumer goods, a significantly depreciating rupee, and modest remittance growth.
The report also assessed recent policies like the Roshan Digital Account (RDA) and Naya Pakistan Certificates (NPCs). While these measures have boosted remittance inflows and attracted foreign investment, their benefits have largely been confined to the real estate sector and have not significantly advanced industrial or agricultural productivity.
To tackle these challenges, PRAC proposed targeted reforms such as adjusting yields on investment certificates, reducing remittance transfer costs, directing RDA funds towards special economic zones (SEZs) and agro-processing, and simplifying regulations for corporate foreign currency accounts. Additionally, the report suggested adopting a managed-float or “peg-and-revalue” exchange rate system, aligned with the Real Effective Exchange Rate (REER), to strengthen the currency and reduce volatility.
Implementing these reforms, the report said, would bolster Pakistan’s foreign exchange management, build economic resilience, and lay the groundwork for sustainable, export-led growth.
These recommendations underscore the need for a dynamic and robust reserves-management framework to protect against external shocks like oil price surges and political instability.
Although remittance flows have shown resilience, they are not sufficient to shield Pakistan’s reserves alone. Initiatives like the RDA and NPCs have succeeded in attracting remittances and investment, but their impact has been largely limited to sectors like real estate, with minimal contribution to industrial and agricultural development.
To better harness diaspora capital, the report urged adjusting NPC yields to align with domestic monetary policy, lowering remittance transfer fees, and channeling RDA deposits into high-impact sectors such as SEZs and agro-processing.
The report also noted that Pakistan’s exchange rate policy has shifted between fixed and floating systems, which has contributed to significant currency depreciation in recent years. This depreciation has worsened trade deficits, raised import costs, and undermined economic stability.
It concluded that a more strategic and stable approach to forex reserve management is crucial for safeguarding the currency and ensuring resilience in the face of external pressures.
