Over time, workers’ remittances have evolved into the single most critical stabilising force for Pakistan’s external sector, effectively anchoring both the current account and broader balance of payments. With inflows reaching over $38 billion in FY25, they now consistently offset the country’s persistent trade deficit, covering more than 100 per cent of the gap in recent years.

This represents the primary buffer against Pakistan’s chronic import dependence and limited export base. In effect, remittances function as a quasi-export stream, directly financing the trade imbalance. Without these inflows, the current account would face persistent and significantly wider deficits, bringing pressure on the exchange rate and foreign exchange reserves.

The data underscores that Pakistan’s external account is reliant on remittances for stability. In FY25, exports stood at roughly $40.7bn against imports of over $70bn, creating a trade deficit of about $29bn, which was entirely bridged by remittance inflows. Actually, this translates into remittances financing around 130pc of the trade gap, a ratio that has remained above 100pc in the last five years.

Such dependence highlights both their importance and the inherent vulnerability: any disruption in remittance flows due to geopolitical shocks, oil price cycles or labour market conditions in host countries can quickly transmit into external sector stress. As a result, sustaining and formalising these inflows is essential for maintaining current account sustainability, exchange rate stability and overall macroeconomic equilibrium.

Expanding the scope of Roshan Digital Accounts could channel remittances into productive investments rather than consumption

Despite steady growth in formal remittances, a substantial proportion — estimated between 20pc and 50pc of formal inflows — continues to move through informal channels such as hawala and hundi. These informal channels persist due to their cost advantage, speed, accessibility and deep-rooted trust within Pakistani communities abroad, despite lacking regulatory oversight.

On the other hand, remittance inflows through traditional banking channels are slow, costly and dependent on intermediary systems. Settlement cycles can take one to three days, and pricing lacks transparency. Additionally, the system relies heavily on subsidies and incentives to remain competitive against informal alternatives, creating a significant fiscal burden.

On top of that, geopolitical risks add further uncertainty. Nearly 55pc of Pakistan’s remittances are concentrated in Gulf Cooperation Council (GCC) countries, exposing them to oil price swings and regional instability.

Economic slowdowns could also weaken inflows over time. No wonder the ongoing Middle East crisis, triggered by the US-Israel war on Iran, has heightened concerns about potential declines in remittances from the GCC.

It is in this context that Pakistan expanded the scope of its Roshan Digital Account (RDA) framework last month, opening the platform, initially launched to attract savings from overseas Pakistanis, to all foreign nationals, companies, and institutional investors to woo a broader pool of investment. Under the revised framework, these new participants, like non-resident Pakistanis, will be able to invest in equities and government securities through the fully digital platform.

The move builds on the government’s efforts to position the RDA framework as a one-window solution for cross-border banking and investment, while also diversifying sources of inflows beyond the traditional overseas Pakistani base.

“The launch of the updated RDA 2.0 includes clearer tax treatment for users, revised and more attractive rates of return and expanded eligibility,” explains Zafar Masud, the chairman of the Pakistan Banks Association (PBA).

“The idea is to provide a broader, more accessible platform for investment into Pakistan’s fixed income instruments, government securities, the stock market and bank deposits. Non-residents can now also invest in pension funds, while foreign investors gain an additional channel beyond Eurobonds to participate in Pakistan’s financial markets.”

Recently, the State Bank of Pakistan’s (SBP) governor, the finance minister and the Pakistan Banks Association chairman held a series of meetings with Pakistani and South Asian diaspora, as well as American fund managers, on the sidelines of the IMF-World Bank Spring Meetings in Washington to market the changes in RDA’s scope and the opportunities it offers. “

Over the next four to six months, you will see the results of our increased engagement with overseas Pakistanis, diaspora communities and global investors over RDA 2.0,” maintains Mr Masud.

The RDA initiative enables remote account opening, multi-currency services, full repatriation of funds and access to diverse investment opportunities in equities and government-backed certificates, asset financing for housing and vehicles, and social contributions such as pensions and charitable donations.

It has attracted over 900,000 accounts and more than $12 billion in inflows since its launch in 2020. Now policymakers are seeking to channel a larger share of these inflows into productive investments rather than consumption. “The expansion of eligibility to foreign individuals and institutional investors potentially transforms the initiative from a diaspora-focused facility into a broader international investment gateway,” observes Mr Masud.

For this, the government and the SBP are incentivising the use of RDAs that provide clear advantages: access to investment opportunities and significantly lower financing rates — often 400 to 500 basis points below commercial rates — for housing and auto loans. “Strengthening remittances has to remain a policy priority. We believe targeted policy measures can help increase these inflows for investment purposes. After all, the benefits associated with RDAs are not available to those using informal channels,” the PBA chief argues.

Even though the introduction of RDA addresses many of the barriers that non-resident Pakistanis face when sending money through the traditional banking channels, the majority of remittances still bypass this system. This indicates significant untapped potential and demands a push for digital financial innovation as part of the next phase of remittance reforms.

One potential avenue, according to technology professionals, could be the use of dollar-backed stablecoins. Pakistan’s policy framework — introduction of a Virtual Assets Ordinance, the establishment of a regulatory authority for virtual asset service providers, and ongoing exploration of central bank digital currency (CBDC) initiatives — is already evolving to support this experimentation.

However, global experience with stablecoins and blockchain-based payment systems — for example, initiatives taken by Singapore, Japan and Hong Kong — highlight the importance of regulated issuance, strong reserve backing and integration with existing banking systems.

“Careful governance is essential to manage risks related to capital flows, currency stability and regulatory oversight,” the chief executive of a tech company stressed. “Transactions have to be pre-funded, enabling instant execution with all flows fully backed by real USD inflows into the banking system. The design should ensure regulatory compliance, eliminate crypto exposure for banks and maintain financial stability.”

Published in Dawn, The Business and Finance Weekly, April 27th, 2026