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Pakistan’s economy is increasingly reliant on remittances from overseas workers even as the country’s exports continue to slide, raising questions about long-term economic sustainability.
Official data shows that remittances reached a record $3.59 billion in December 2025, marking a 16.5% year-on-year increase. These inflows have helped stabilize foreign exchange reserves, which stood at $21.01 billion by late December, providing an import cover of about 2.6 months.
At the same time, exports fell sharply by 20.4% in December, totaling $2.32 billion, reflecting deeper structural weaknesses in the domestic industrial sector. During the first half of FY26, the trade deficit widened by nearly 35% to $19.2 billion, as imports rose by 11% while exports fell by 9%. The textile sector, which forms over half of Pakistan’s exports, has also shown a decline in its contribution.
While Pakistan celebrated record remittances of $3.59 billion in December 2025, exports fell sharply to $2.32 billion, marking a 20% decline from last year. The divergence highlights a growing dependency on overseas workers rather than domestic production. The key numbers are summarized below:
| Indicator | December 2025 | December 2024 | Year-on-Year Change |
|---|---|---|---|
| Remittances | $3.59 billion | $3.08 billion | +16.5% |
| Exports | $2.32 billion | $2.91 billion | -20.4% |
| Trade Deficit (FY26 H1) | $19.20 billion | $14.24 billion | +35% |
| Foreign Exchange Reserves (Dec 2025) | $21.01 billion | $18.5 billion | +13.5% |
Economists warn that the country’s economic model has become skewed toward consumption rather than production. Mudassar Masood Chaudhry, former executive committee member of the Lahore Chamber of Commerce and Industry, highlighted that remittance inflows are largely being used to maintain domestic consumption rather than boosting investment in productive sectors.
“The government needs an FDI policy that channels capital into technology, exports, and industrial development, while discouraging speculative investment in low-productivity sectors,” he said.
Chaudhry further emphasized that reliance on overseas workers to sustain domestic consumption is unsustainable in the long run, noting that without structural reforms, Pakistan risks becoming trapped in a dependency model. Analysts suggest urgent interventions to modernize industrial infrastructure, reduce energy costs, and incentivize exports to ensure sustainable foreign exchange generation.
The government has set ambitious targets for remittances and is encouraging inflows, but analysts stress that export revival and industrial modernization remain critical to prevent the economy from over-dependence on migrant workers.
