3 min read
Pakistan’s remittances are projected to exceed $41 billion this year, marking a notable increase from $38 billion last year, Federal Minister for Finance and Revenue Muhammad Aurangzeb said on Wednesday. Addressing the Pakistan Policy Dialogue, he credited the rise to growing confidence among overseas Pakistanis and improved macroeconomic stability.
Aurangzeb highlighted ongoing reforms at the Federal Board of Revenue (FBR), stressing that tax compliance and enforcement would be the primary tools for implementing laws. “Tax policy now rests with the Ministry of Finance,” he said, noting that FBR’s role is limited to revenue collection.
The finance minister also spoke of reforms in the energy sector and continued progress on privatization. He cited Pakistan International Airlines privatization with participation from local investors, and noted that 24 state-owned entities have been handed over to the Privatization Commission.
He added that inefficiencies in state-owned enterprises cost Pakistan around Rs 1,000 billion annually, prompting closures of entities such as Utility Stores Corporation, PWD, and PASSCO, where subsidies were misused and corruption persisted.
Fiscal Policy and Debt Management
Aurangzeb cautioned against repeatedly raising duties, calling it harmful for the economy. “We need to rationalize duties and reduce the cost of doing business,” he said.
He identified debt servicing as the government’s largest expense, highlighting the establishment of a Debt Management Office to address the issue. The government saved Rs 850 billion in interest payments last year, with similar savings expected this year. Lower interest rates are expected to ease the need for aggressive debt management.
The finance minister also announced plans to issue Panda Bonds in the Chinese market within the next two weeks to diversify financing sources.
Investor sentiment appears to be strengthening, with 73% of investors now favoring Pakistan, up from 61% previously. Large-scale manufacturing has shown positive results in the first quarter of the current financial year, private sector credit reached Rs 1.1 trillion, and 135,000 new investors entered the stock market. The finance minister also noted that Pakistan now has the third-largest global freelancer workforce, highlighting the potential of digital and service exports.
Remittance Reliance: Opportunities and Risks
Remittances currently make up roughly 7–8% of Pakistan’s GDP, providing a crucial cushion for foreign exchange reserves. While the inflows are strong this year, analysts caution that dependence on remittances has limitations.
Younger generations of overseas Pakistanis, born and raised abroad, may feel less direct obligation to send money compared to their parents, which could slow inflows over time. Sustained reliance on remittances without parallel structural reforms could expose Pakistan to volatility in foreign exchange, consumption patterns, and fiscal stability.
Experts suggest that to mitigate this risk, Pakistan must expand exports, industrial output, and domestic investment, reducing vulnerability to changes in diaspora behavior.
Looking ahead, Aurangzeb stressed that Pakistan could become a $3 trillion economy by 2047, provided population growth is controlled and ongoing reforms continue. Meanwhile, remittances will remain a vital source of foreign exchange, supporting private sector activity and macroeconomic stability, even as the government works to broaden the base of sustainable domestic growth.
