KARACHI: Foreign exchange companies contributed around $450 million to remittance inflows during June, taking their total contribution to approximately $5 billion in FY25, according to the Exchange Companies Association of Pakistan (ECAP).

“We sold about $450m to banks in June, highlighting our growing role in supporting the country’s exchange rate stability,” said Zafar Paracha, Secretary General of ECAP.

Exchange companies have welcomed the State Bank of Pakistan’s (SBP) recent decision to include them in the Pakistan Remittance Initiative (PRI). For years, these companies have demanded similar incentives to those offered to banks, arguing that they also play a crucial role in channelling remittances.

“This incentive will certainly boost remittance inflows through exchange companies, and I believe FY26 could witness a new record,” Mr Paracha said. He estimated the total remittances handled by exchange firms during FY25 to be around $5bn, although he noted the figure is not yet officially confirmed.

The SBP issued a circular this week confirming the inclusion of exchange companies in the PRI framework. Under the new arrangement, exchange firms will receive Rs22 per dollar transaction, a substantial increase from the previous Rs2 they had been receiving for years.

Pakistan received $35bn in remittances during the first 11 months of FY25. With June inflows added, the total figure is expected to surpass the revised target of $38bn for the fiscal year.

Despite the significant contribution of remittances, the country’s export performance remained weak. Exports grew by only 6pc in FY25, far below the government’s ambitious goal of increasing exports to $60bn. Stronger remittance inflows have partly offset the shortfall.

Nonetheless, the government managed to maintain exchange rate stability for more than a year, encouraging exporters to release their holdings and helping importers plan over longer time horizons. Pakistan also secured rollover agreements worth approximately $16bn from friendly countries, including China, the UAE, and Saudi Arabia, enabling the SBP to raise its foreign exchange reserves to $14.5bn by the end of FY25.

However, in recent weeks, the rupee has begun to slide against the US dollar despite healthy inflows in the currency market. Over FY25, the dollar appreciated by at least Rs5. On July 3, the interbank rate stood at Rs284.06 per dollar, while in the open market, the rate reached Rs286.40.

Globally, the US dollar has been under pressure, losing ground against major currencies, including the euro and the pound. Analysts note that increasing risks associated with the US dollar are prompting investors to diversify into other currencies and commodities like gold.

Published in Dawn, July 6th, 2025