Editorial
Pakistan’s heavy reliance on remittance inflows is a double-edged sword. While remittances provide crucial support to millions of households, boosting disposable income and sustaining domestic consumption, their broader macroeconomic impact is more complex. Experts warn that unchecked remittance inflows can overvalue the rupee, weaken exports, and constrain long-term growth.
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According to the State Bank of Pakistan, remittances reached $16.1 billion in the first five months of FY26, up 9.3% from last year. With nearly 10 million Pakistanis abroad sending home around $38 billion annually, roughly 10% of GDP, the inflows are significantly larger than expected for a country at Pakistan’s income level. While this supports consumption, it raises costs relative to productivity, a pattern economists identify as Dutch disease, which undermines the export-oriented sector.
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To reverse this trend, policymakers must manage remittances strategically. The central bank should build foreign reserves instead of letting inflows inflate consumption and the rupee. Simultaneously, the government must pursue foreign direct investment in high-productivity tradable sectors while discouraging speculative, low-return investments. Addressing elite rent-seeking behaviour is critical to ensure remittances empower the broader economy rather than just the privileged few.
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