Pakistan remittances hit record $41.6 billion, calls grow to cut foreign debt

Pakistan's record inflow of workers' remittances during the last fiscal year has prompted renewed calls from the business community to use part of these funds for long-term economic reforms,

Pakistan’s record inflow of workers’ remittances during the last fiscal year has prompted renewed calls from the business community to use part of these funds for long-term economic reforms, including reducing the country’s external debt, instead of allowing the entire amount to be consumed through household spending.

Business leaders believe the sharp rise in remittances has become one of the strongest pillars of Pakistan’s economy at a time when exports and other foreign exchange-earning sectors continue to face significant challenges. They argue that the government should introduce a transparent and voluntary framework enabling overseas Pakistanis to contribute directly toward lowering the country’s foreign debt.

Former Executive Member of the Lahore Chamber of Commerce and Industry (LCCI), Mudassar Masood Chaudhry, said the consistent growth in remittances demonstrates the confidence of overseas Pakistanis in supporting the country’s economy. He suggested that policymakers should capitalize on this momentum by establishing a dedicated mechanism through which a small, predetermined portion of remittances could be voluntarily invested in debt repayment initiatives.

According to the latest figures released by the State Bank of Pakistan (SBP), overseas Pakistanis remitted $41.6 billion during fiscal year 2025-26, representing an increase of 8.6 percent compared to $38.3 billion recorded in the previous fiscal year. The central bank described the amount as the highest annual remittance inflow in Pakistan’s history, averaging approximately $3.46 billion every month.

Saudi Arabia remained the largest contributor to Pakistan’s remittance inflows, sending $9.75 billion during the fiscal year. The United Arab Emirates ranked second with $8.80 billion, followed by the United Kingdom with $6.32 billion, the European Union with $5.22 billion, other Gulf countries with $3.93 billion, and the United States with $3.62 billion.

The record inflows have also strengthened Pakistan’s foreign exchange reserves. During the week ending July 3, 2026, the SBP’s foreign exchange reserves increased by $1.94 billion, reaching $18.47 billion, while the country’s total liquid foreign reserves climbed above $23.98 billion. The improvement reflects a significant recovery from nearly $13 billion a year earlier, despite substantial repayments of external debt during the same period.

Economic observers believe the surge in remittances has helped stabilize the exchange rate, improve foreign exchange reserves and reduce pressure on Pakistan’s external account. However, business representatives argue that these inflows should now be viewed as a strategic national resource capable of supporting broader economic development.

Chaudhry proposed establishing a voluntary Overseas Debt Reduction Fund that would allow Pakistanis living abroad to contribute directly toward reducing the country’s external liabilities. He stressed that such a scheme must operate with complete transparency, independent oversight and parliamentary accountability to ensure public trust and encourage participation.

He further emphasized that remittances should increasingly be directed toward productive investments, infrastructure development and economic expansion rather than being used primarily for household consumption. According to him, the government should introduce attractive investment opportunities, incentive packages and secure financial products specifically designed for overseas Pakistanis, enabling them to play a greater role in Pakistan’s long-term economic growth.

He noted that if managed effectively, remittances could become a cornerstone of Pakistan’s financial stability, strengthen investor confidence and gradually reduce dependence on external borrowing.

Pakistan-born US businessman Sheikh Tahir Imran also supported the proposal but stressed that its success would depend entirely on governance and credibility. He said overseas Pakistanis have consistently demonstrated their willingness to assist the country’s economy during difficult periods, but any initiative seeking voluntary contributions must remain free from political influence.

He suggested that the proposed fund should be managed by an independent institution operating under parliamentary supervision to ensure transparency and accountability. He also recommended complementing the initiative with financial instruments such as diaspora bonds, tax incentives and investment-linked returns, similar to successful models adopted by several remittance-dependent economies around the world.