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Express Tribune
14-04-2025
- Business
- Express Tribune
Remittances hit record $4.1b
Driven by the economic migration of approximately 2.4 million Pakistanis amid the worsening state of the domestic economy, workers' remittances to Pakistan surged past the $4 billion mark for the first time in March 2025. Workers' remittances have reached an unprecedented $4.1 billion, said the State Bank of Pakistan (SBP) in a press release. This reflects a strong year-on-year growth of 37.3% and a month-on-month increase of 29.8%. Cumulatively, remittances rose to $28.0 billion during the first nine months of FY25 (July-March), representing a 33.2% increase compared to the $21.0 billion received during the same period last year. The bulk of March inflows came from Saudi Arabia ($987.3 million), the United Arab Emirates ($842.1 million), the United Kingdom ($683.9 million), and the United States ($419.5 million), underscoring the critical role of the overseas Pakistani community in supporting the national economy "We believe, higher remittances are due to Ramazan/Eid effect," said Topline Securities. "Remittances have hit a record high, driven by growing confidence in the stability of the Pakistani Rupee due to a narrower gap between interbank and open market exchange rates," said Head of Research at JS Global, Waqas Ghani Kukaswadia. This stability is largely credited to stricter foreign exchange regulations. Additionally, a recent surge in immigration, particularly to Gulf countries, has boosted remittance inflows. With an increasing number of people attempting to get out of the country, Pakistan's monthly remittances have shown a strong upward trend over the past year. The remittance inflows had largely remained within the range of $2.8 to $3.2 billion, with notable peaks in May 2024 ($3.24 billion) and June 2024 ($3.16 billion). Inflows dipped slightly during the summer months but remained stable, with $3 billion in July, $2.94 billion in August, and $2.86 billion in September 2024. October saw a rebound to $3.05 billion, followed by $2.92 billion in November and $3.08 billion in December. The start of 2025 saw a steady climb, with $3.00 billion in January and $3.12 billion in February 2025, leading up to the sharp rise in March. This surge marks a significant jump from February 2024's low of $2.25 billion, indicating renewed momentum in overseas inflows. SBP Governor Jameel Ahmad, while attending the gong ceremony at the Pakistan Stock Exchange (PSX) on Monday, highlighted noticeable progress made by Pakistan on the macroeconomic front. Reflecting on the country's recent economic journey, Ahmad emphasised that Pakistan has successfully transitioned from a period marked by macroeconomic instabilitycharacterised by high inflation, low reserves, and fears of defaultto one of stable macroeconomic conditions, renewed confidence, and recovery in economic growth. He pointed to significant improvements across multiple economic indicators, signalling a much-needed revival of economic growth. He highlighted that inflation has come down substantially, external current account balance has turned into a surplus, FX buffers have been rebuilt, and public debt indicators have improved considerably during the past couple of years. He highlighted that workers' remittances reached an all-time high level of $4.1 billion in March 2025 – partly reflecting the result of government and SBP efforts to incentivise the channelling of inflows via formal channels, as well as the smooth functioning of the domestic FX market. He said that total remittances for FY25 are expected to be around $38 billion. The SBP governor noted that with a sound macroeconomic base and renewed investor confidence, we have the opportunity to set Pakistan on a trajectory of broad-based, inclusive prosperity. He emphasised that this macroeconomic stability has been achieved through difficult policy decisions. "Now, it is crucial to focus on sustainable growth." He pointed out that enhancing productivity and boosting exports must become central to Pakistan's growth model, as export activity directly contributes to greater productivity, innovation, and foreign investment. Ahmad urged stakeholders to come together and commit to long-term strategies that ensure sustainable and inclusive growth for Pakistan. While the country is on the path to recovery, he underscored the need for reforms to address structural issues to avoid boom-bust cycles and economic stagnation. He reaffirmed the SBP's commitment to creating a resilient and inclusive financial ecosystem, supported by an enabling regulatory environment, as the foundation for Pakistan's economic prosperity. The SBP governor also emphasised the need for financial literacy to achieve true financial inclusion. He highlighted that the SBP is holding the Pakistan Financial Literacy Week from April 14 to 18, where various activities are planned across the country to engage different segments of society in financial literacy efforts. Ahmad reaffirmed that enhancing financial inclusion remains a top strategic goal within the SBP's Strategic Vision 2028, alongside building an innovative and inclusive digital financial ecosystem. Ahmad shared key initiatives under the National Financial Inclusion Strategy (NFIS) 2024-28, including efforts to increase financial inclusion from 64% to 75% by 2028 while reducing the gender gap in financial services from 34% to 25% by 2028. The SBP governor also expressed his appreciation to the PSX management for their continued efforts to provide a vital platform for the country's capital market. Ahmad highlighted the importance of the PSX in enabling corporations to raise capital and offering investors the opportunity for substantial returns on their savings.
Express Tribune
17-03-2025
- Business
- Express Tribune
Current account deficit at $12m in Feb
Pakistan's current account balance (CAB) recorded a deficit of $12 million in February 2025, a significant decrease against a deficit of $399 million in January 2025. For the July-February FY25 period, the current account posted a surplus of $0.7 billion, a sharp contrast to the $1.7 billion deficit recorded during the same period last year. This turnaround has largely been driven by strong remittance inflows, $3.1 billion, and a modest rise in exports. However, underlying structural issues remain, as the trade deficit in goods and services remains high at $2.73 billion. Despite a 2.4% increase in exports to $2.59 billion, imports surged by 15% to $5.02 billion, straining external balances and raising concerns about inflationary pressures and external financing needs. While the improvement in the current account provides temporary relief, weak foreign investment inflows, rising debt repayments, and persistent trade imbalances continue to pose significant risks to Pakistan's external sector. "The current account improved compared to the previous month but remained in the red due to a high trade deficit offsetting the benefits of increased remittances in February," Research Head of JS Global Waqas Ghani Kukaswadia said. Despite this, the 8MFY25 current account balance shows a surplus, though it has decreased to US$691m. The financial account, which includes foreign loans and investments, has been declining in recent months. "We highlight that some planned foreign inflows have not materialized which may be unlocked after the IMF disbursement," he said. This decline in the Balance of Payments is putting pressure on State Bank of Pakistan (SBP) reserves which dropped by $634m CYTD. Additionally, import cover has fallen from 2.8 months to 2.3 months. Pakistan's Balance of Payments (BoP) data for February 2025, released by the SBP, presents a mixed economic scenario. The relatively improved CAB can be attributed to a growth in exports and strong secondary income inflows, primarily from workers' remittances, which totalled $3.1 billion. However, this positive development masks structural concerns, as trade deficit in goods and services remains high at $2.73 billion. Despite a 2.4% increase in exports (YoY) to $2.59 billion, imports surged by 15% (YoY), reaching $5.02 billion, further straining the trade balance. The rising import bill, driven by energy and capital goods demand, signals potential inflationary pressures and external financing challenges.
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Express Tribune
12-03-2025
- Business
- Express Tribune
Moody's upgrades banking outlook
Listen to article Moody's, the global rating agency, has upgraded Pakistan's banking sector outlook from stable to positive and forecasts GDP growth to reach 3% in 2025, citing resilient financial performance and improving macroeconomic conditions. However, challenges persist, particularly concerning long-term debt sustainability and high exposure to government securities. The shift from stable to positive reflects stronger government liquidity, a more stable external position, and a recovering economy, with GDP growth forecast at 3% in 2025. While long-term debt sustainability and government securities exposure remain concerns, Moody's expects lower inflation and policy rate cuts to drive private-sector investment. The upgrade aligns with Pakistan's sovereign rating outlook, signalling growing confidence in the country's financial stability. "This development will positively impact Pakistan's economy by encouraging private-sector investment due to lower borrowing costs, boosting consumer spending, and enhancing financial sector confidence," said Ali Najib, Head of Equity Sales at Insight Securities. Moody's has raised Pakistan's rating to Caa2 positive, as the country's banks hold nearly half of their assets in government securities. However, long-term debt sustainability remains a key risk due to Pakistan's weak fiscal position and persistent liquidity and external vulnerability challenges. Moody's forecasts Pakistan's GDP growth to reach 3% in 2025, up from 2.5% in 2024 and a contraction of -0.2% in 2023. Inflation is also projected to drop to 8% in 2025 from an average of 23% in 2024. Lower inflation and reduced borrowing costs will slow the formation of problem loans, though net interest margins are expected to narrow due to interest rate cuts. Despite high dividend payouts, banks are expected to maintain adequate capital buffers, supported by subdued loan growth and strong cash generation. The approval of a 37-month, $7 billion International Monetary Fund (IMF) Extended Fund Facility in September 2024 has provided external financing stability. GDP growth is projected at 3% in 2025 and 4% in 2026, aided by a 10-percentage-point interest rate cut since June 2024. Inflation is expected to fall to 8% in 2025 from 23.4% in 2024, spurring private-sector investment. "This rating upgrade reflects the improvement in the country's macroeconomic indicators coupled with the strong financial performance of the banking sector in the outgoing year," said Waqas Ghani Kukaswadia, Deputy Research Head at JS Global. As of September 2024, government securities made up 55% of banks' total assets, linking their stability to the sovereign. Problem loans rose to 8.4% of total loans, though overall loans represent just 23% of banking assets. Lending to private businesses grew by 5% year-over-year, driven by regulatory Advances to Deposit Ratio (ADR) requirements. However, with the ADR tax removal in 2025, lending pressure will ease, though demand may stay subdued despite lower borrowing costs. Small and Medium sized Enterprise (SME) financing initiatives are expected to support modest loan growth, while problem loans may remain at around 9% of gross loans. With interest rates cut to 12%, net interest margins are expected to decline. Banks earn primarily from government securities, which now yield lower returns. Increased corporate tax rates (44% from 39%) will offset the ADR tax removal, and return on assets is forecasted at 0.9%-1.0% in 2025. Strong profitability and low credit growth have bolstered capital buffers, with Tier 1 capital improving to 17% and total capital-to-risk-weighted assets at 21.5%. Customer deposits remain the primary funding source (60% of assets), with remittances boosting liquidity. While banks hold significant government securities as collateral, foreign exchange risks have eased with rising reserves. The government's capacity to support banks has improved, driven by its upgraded sovereign rating and stronger fiscal position.
Express Tribune
10-02-2025
- Business
- Express Tribune
Remittances surge 25.2% YoY to $3b
KARACHI: Pakistan's workers' remittances recorded a strong inflow of $3 billion in January 2025, reflecting a 25.2% year-on-year (YoY) growth and marking the fourth consecutive current account surplus in 2025. Cumulatively, from July to January of the fiscal year 2025, remittances reached $20.8 billion, marking a 31.7% increase compared to $15.8 billion in the same period last year, according to the State Bank of Pakistan (SBP). Major sources of remittance inflows in January included Saudi Arabia ($728.3 million), the United Arab Emirates ($621.7 million), the United Kingdom ($443.6 million), and the United States ($298.5 million). Analysts expect this upward trend to continue, with Sana Tawfiq, Head of Research at Arif Habib Limited (AHL), stating, "The surge aligns with market expectations." This rise in remittances is seen as a key driver of Pakistan's improving external account position. Pakistan's current account surplus continued its upward trend in January 2025, marking the fourth consecutive month in positive territory, according to AHL. According to data released by the Pakistan Bureau of Statistics (PBS), the trade deficit declined by 5.5% month-on-month (MoM) to $2.313 billion in January. Based on estimates, the country is expected to post a current account surplus of $168 million for the month, driven by a goods trade deficit of $2.082 billion, a services deficit of $200 million, a primary income deficit of $750 million, and a secondary income balance of $3.2 billion. The overall surplus for the first seven months of the fiscal year (7MFY25) is projected to reach $1.4 billion. "At this run rate, workers' remittances for FY25 are projected to cross $35 billion," said Deputy Head of Research JS Global Waqas Ghani Kukaswadia. Remittances over the past eleven months have averaged $3 billion per month, a significant increase from the $2.3-$2.4 billion monthly average seen in FY23 and most of FY24. The major contributor to this positive trend is workers' remittances, which recorded an inflow of $3.0 billion in January 2025, reflecting a 25.2% YoY growth, according to the SBP. Cumulatively, during July-January FY25, remittances stood at $20.8 billion, a 31.7% increase compared to $15.8 billion in the same period last year. Pakistan's remittance inflows remained elevated in January 2025, hitting the $3.0 billion mark and reflecting a 25% YoY increase, said Kukaswadia. Cumulatively, during 7MFY25, overseas Pakistanis sent home a record $20.8 billion (+32% YoY) in remittances. The growth was led by strong remittance flows from the UAE and Saudi Arabia, with a jump of 52% YoY and 24%, respectively, in January 2025. The UAE's share over the past two fiscal years was around 17.5%, but it has now risen to 21%, with Dubai contributing the largest portion, accounting for three-fourths of the remittances from the UAE, he added. Recent months have witnessed a remarkable turnaround in Pakistan's current account, with remittances providing crucial support and playing a key role in sustaining current account surpluses. Experts say the increase is due to the growing number of Pakistanis leaving the country on student or worker visas, which has both positive and negative implications for the economy. Over the last three years, 600,000 to 800,000 people have left the country, most of them highly educated, leading to a brain drain. While remittances sent by these individuals contribute significantly to foreign exchange reserves, the underlying causes and long-term consequences of this "economic migration" raise concerns about the government's ability to provide adequate opportunities within the country. Although remittances help bolster reserves, stabilise the balance of payments, and finance imports in the short term, critics argue that reliance on remittances masks deeper structural issues. The exodus of skilled professionals limits innovation and long-term economic growth, highlighting the need for domestic opportunities to retain talent.
