Remittances, investments enhance external accounts, supporting Pakistan’s economy

January 28, 2025 (MLN): The external sector has shown growth, with remittances and foreign investments playing a key role in balancing trade dynamics and strengthening external accounts, according to the Government of Pakistan, Finance Division, Economic Adviser’s Wing.

Stable foreign exchange reserves further contribute to Pakistan's economic stability, signaling a steady recovery in the country's financial outlook.

The State Bank of Pakistan (SBP) has allowed exchange companies to import up to 50% of export consignment values in cash US dollars until June 2025.

This move is part of Pakistan’s broader efforts to stabilize the foreign exchange market and support trade and investment activities.

Export

Export receipts for Pakistan increased by 7.2% to $16.2 billion in Jul-Dec FY2025, driven by strong textile exports, particularly knitwear and readymade garments, and robust performance in food exports, while certain sectors like raw cotton and sports goods saw declines.

The United States remains Pakistan's top export destination at 18.6%, with steady growth of 9.8%, while exports to the UK (8.3%) and Germany (15.1%) also increased; however, exports to China declined by 13.2%, and regional trade with Afghanistan (92%) and Bangladesh (29.3%) saw significant growth, the report added.

Major Export Destination H1- FY2025 (% Share)

Import

Imports in Jul-Dec FY2025 rose by 9.3% to $27.7bn, driven by a 29% increase in machinery imports, particularly power-generating machinery and electrical apparatus, and a 13.5% rise in non-petroleum imports.

Notably, transportation imports surged by 5%, with road vehicles increasing by 13%, while food imports declined by 1.6%, and petroleum imports saw a volume increase but were moderated by lower unit prices, the report highlighted.

Trade in Service

The services trade deficit increased by 16.8% to $1.59bn in Jul-Dec FY2025, despite a 6.8% growth in service exports, particularly telecommunications and IT services, which rose by 28%, the reported noted.

Service imports grew by 9.5%, driven by higher travel and transport service imports, while the current account deficit decreased to $1.21bn, showing improvement due to stronger export performance and a surge in workers' remittances, with a $0.58bn surplus in December 2024.

Worker’s Remittance

Remittances grew by 32.8% to $17.8bn in H1 FY2025, with Saudi Arabia contributing 24.8% ($4.4 billion), the UAE rising by 54% to $3.6bn, and notable increases from the UK, US, and EU countries like Italy, Spain, and Germany.

Country-Wise Remittances (H1-FY2025), % Share

Current Account

The current account surplus reached $1.21bn in Jul-Dec FY2025, reversing the previous year's deficit, driven by increased workers' remittances and stronger export performance, with a $0.58bn surplus in December 2024 marking the third consecutive monthly surplus, the report added.

Foreign Investment

Foreign Direct Investment (FDI) inflows rose by 20% to $1.329bn in Jul-Dec FY2025, driven by contributions from China, Hong Kong, and the UK, with the power sector attracting the largest share.

Country-wise FDI Inflows (%) (H1-FY2025)

Total foreign investment inflows amounted to $1.25bn, while reserves increased by 17.01% to $16.4bn, bolstered by positive current account performance and IMF disbursements.

Reserve and Exchange Rate

Pakistan's foreign exchange reserves improved to $14.0bn in FY2024, with the rupee's stability attributed to the strengthening of reserves and measures to regulate the foreign exchange market, the report highlighted.

The external sector saw significant improvements with increased remittance inflows, strong export performance, and growth in Foreign Direct Investment (FDI), particularly in the energy and financial sectors.

Additionally, the rupee stabilized against the dollar, bolstered by higher foreign exchange reserves and effective fiscal management.

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