Exchange firms forecast $5 billion in remittances before Ramadan wraps up

KARACHI: Remittance inflows in Pakistan have reached unprecedented levels, with exchange companies projecting an accumulation of $5 billion by the end of Ramazan. Zafar Paracha, Secretary General of the Exchange Companies Association of Pakistan, stated on Saturday.

“We have already sold between $3.5 billion to $4 billion to banks in the first eight months of FY25, and we anticipate that Ramazan will contribute even more to this total.”

During the first seven months of FY25, the country received $20.9 billion in remittances from July to January, marking a substantial increase of 32.27 percent from $15.8 billion during the same period last year. This surge already surpasses the $5 billion growth target set for FY25.

Paracha expressed confidence, saying, “We are optimistic that we will sell $5 billion to the banks by the end of Ramazan, which would be a significant milestone.”

Overseas Pakistanis send $14.8 billion in remittances in five months

Exchange companies have urged the government to implement measures that would better support overseas Pakistanis in enhancing remittance inflows, rather than providing subsidies to exporters. However, a powerful group of exporters continues to receive benefits without delivering meaningful growth, while remittance flows have outstripped export earnings.

Paracha suggested that offering more incentives and enacting policy changes could potentially double the volume of remittances. Some experts in the money market have raised concerns over the government’s decision to lean on the International Monetary Fund (IMF) for a $7 billion bailout package.

An IMF mission is currently conducting a forensic audit of the economy to determine the disbursement of the second tranche amounting to $1.1 billion under the Extended Fund Facility.

“While the IMF will provide $7 billion over a period of 37 months, overseas Pakistanis contribute $35 billion in just one year,” according to market experts.

Another exchange company owner remarked, “These Pakistanis deserve greater attention than the IMF.”

The significant increase in remittances has played a crucial role in stabilising the exchange rate and assisting the State Bank of Pakistan (SBP) in bolstering its foreign exchange reserves through dollar purchases in the interbank market.

The SBP has acquired approximately $3.8 billion from banks in the first four months of the current fiscal year.

Traditionally, the central bank purchases dollars to maintain adequate reserves for exchange rate stabilisation. However, market experts believe that the sum accumulated by the SBP during this period is disproportionately high compared to the commercial borrowing undertaken by the country.

Paracha noted that the average monthly inflows from exchange companies in the first eight months of this fiscal year have ranged from $400 million to $450 million. One of the primary factors contributing to the increase in remittances is the government’s crackdown on illegal currency operations. Concurrently, instances of money laundering have also decreased, according to a currency expert.