Exchange sector gains ground in Pakistan's remittance market

July 07, 2025 (MLN): Foreign exchange companies played a growing role in Pakistan’s remittance inflows in FY25, contributing an estimated $5 billion, including $450 million in June alone, according to the Exchange Companies Association of Pakistan (ECAP).

Zafar Paracha, ECAP Secretary General, noted that the sector’s contribution was essential for maintaining exchange rate stability, adding that “we sold about $450m to banks in June.”

This rising role has been formally acknowledged by the State Bank of Pakistan (SBP), which issued a circular this week confirming the inclusion of exchange firms in the Pakistan Remittance Initiative (PRI).

For years, exchange companies have urged for parity with banks regarding incentives.

Under the new arrangement, they will now receive Rs22 per dollar transaction significantly up from the long-standing Rs2 rate.

Paracha welcomed the move, predicting a record-setting year ahead: “This incentive will certainly boost remittance inflows through exchange companies, and I believe FY26 could witness a new record.”

While the $5 billion estimate for FY25 remains unofficial, it underscores a shift in the remittance landscape.

Overall, Pakistan received $35bn in remittances during the first 11 months of FY25.

With June figures factored in, the total is expected to cross the revised target of $38bn.

These inflows helped counterbalance sluggish export growth, which rose by only 6%, well short of the government’s $60bn target.

Remittances also supported Pakistan’s exchange rate stability.

The government succeeded in maintaining a steady rupee for more than a year, encouraging exporters to release holdings and providing predictability for importers.

In parallel, Pakistan secured rollover agreements totaling $16bn from countries including China, the UAE, and Saudi Arabia.

These efforts helped the SBP build its foreign reserves to $14.5bn by FY25-end.

Despite these gains, the rupee has seen renewed pressure in recent weeks. Over FY25, it depreciated by Rs5 against the US dollar.

As of July 3, the interbank rate stood at Rs284.06 per dollar, while the open market rate was Rs286.40.

Globally, the US dollar has been losing ground to major currencies such as the euro and the pound.

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