KARACHI: Despite projected remittance inflows of $38 billion in the current fiscal year (FY25), Pakistan’s per expatriate remittance remains significantly lower than that of peer countries.

“Although remittances have grown at a compound annual rate of 6.1 per cent from 2013 to 2023, per expatriate remittance remains low in comparison to other countries in the region,” said a report released by the Policy Research and Advisory Council (PRAC) on Monday.

“Pakistan’s per expatriate remittance of $2,529 in 2023 remained significantly lower than peer countries — $16,780 for the Philippines, $9,703 for Thailand, $5,914 for Mexico, $4,626 for China and $3,906 for India,” said the report titled “Strategic Management of Pakistan’s Forex Reserves: Boosting Exports and Investment Flows”.

The report said the country’s reserves have fluctuated significantly, largely due to external factors such as global oil price volatility and internal issues like political instability.

For instance, Pakistan’s forex reserves dropped dramatically from $23.5 billion in 2016 to a critically low of $11.3bn in 2023, barely covering three weeks of imports, said the report.

Inflows from overseas workers expected to reach $38bn in FY25

The PRAC attributes this volatility to a range of structural challenges, including a narrow export base overly reliant on textiles, a persistent trade deficit, rising impo­rts of consumer goods, a sharply depreciating rupee, and modest remittance inflows.

The report also evaluates the impact of recent policy measures such as the Roshan Digital Account (RDA) and Naya Pakistan Certificates (NPCs). While these initiatives have helped mobilise remittances and foreign investments, their benefits have largely concentrated in sectors like real estate and have not significantly contributed to industrial or agricultural productivity, said the report.

To address these challenges, PRAC recommended a series of targeted reforms. These include adjusting yields on investment certificates, lowering remittance transfer costs, directing RDA inflows tow­ards special economic zones (SEZs) and agro-processing, and simplifying regulations on corporate foreign currency accounts. Furthermore, the report proposes a shift towards a managed-float or “peg-and-revalue” exchange rate regime, anchored to the Real Effective Exchange Rate (REER), to enhance currency competitiveness and reduce volatility.

By implementing these strategic measures, Pakistan can strengthen its foreign exchange management, build economic resilience, and lay the foundation for sustainable, export-led economic growth, it suggested.

These pressures emphasise the need for a robust and dynamic reserves-management framework to cushion against oil-price spikes, political instability, and other external shocks, said the report.

Although remittances have proven resilient, they remain insufficient as a standalone buffer for Pakistan’s reserves. Measures such as the RDA and NPCs have helped increase remittances and attract foreign investment, but their impact is concentrated in sectors like real estate, with limited influence on industrial and agricultural growth.

To better leverage diaspora capital, the report recommended dynamically adjusting the yields on NPCs to align with domestic monetary policy, reducing remittance transfer fees, and channeling RDA deposits into high-impact areas, such as SEZs and agro-processing industries.

“The country has alternated between fixed and floating exchange rate systems, contributing to significant depreciation in recent years. This depreciation has exacerbated trade deficits, inflated import costs, and weakened economic stability,” the report said, noting that amore strategic and stable approach to forex reserve management is essential to protect the currency and ensure resilience in the face of external shocks.

Published in Dawn, May 27th, 2025