Remittances now cover Pakistan's entire external deficit, says analyst
- Akcakmak said the improvement reflected a complete contrast to 2023
Remittances from overseas Pakistanis now cover 100% of external deficits and account for 10% of GDP, stabilizing the economy after its 2023 near-default, according to analyst Emre Akcakmak.
- Remittances covering 100% of Pakistan's external deficits.
- The significant role of the 10 million Pakistani diaspora.
- Economic turnaround since 2023, including FX reserves and inflation.
- Remittances as "Pakistan's oil" and economic stabilizer.
Remittances from overseas Pakistanis now cover 100% of the country’s external deficits and account for about 10% of GDP, analyst Emre Akcakmak, who is Head of Frontier Markets and portfolio advisor at East Capital, said on Tuesday, highlighting the diaspora’s central role in stabilising Pakistan’s economy after its near-default in 2023.
“At a trailing 12-month level of $44 billion, remittances keep increasing - now covering 100% of the country’s external deficits and accounting for 10% of the GDP - one of the highest globally!
“Without an estimated ~10 million Pakistani diaspora’s remittances, the local economy would certainly be in a completely different shape,” Akcakmak said in a post on social media platform X.
State Bank of Pakistan (SBP) data released on Tuesday largely corroborates the remittance trend. Workers’ remittances totalled $3.9 billion in October, up 14% from $3.42 billion a year earlier, the SBP said. Inflows rose 8.5% from $3.6 billion in September.
Cumulatively, remittances increased 14% to $14.8 billion in July-October FY27, from $13 billion in the same period last year.
The SBP last month raised its forecast for FY27 remittances to $45 billion, from a previous estimate of $44 billion, citing resilient inflows in the first quarter.
Akcakmak said the improvement reflected a complete contrast to 2023.
“Pakistan almost defaulted on its foreign currency bonds in 2023 after external deficits skyrocketed and central bank reserves had only 1.5 months of import cover,” he said.
“Since then, gross FX reserves went up almost 5x, inflation declined from 38% to single digits (lowest: 0.2%, latest: 9.6%) and equities rallied 318% in USD (53% annualised, an unmatched return for the period!).”
Akcakmak credited the estimated 10 million Pakistanis living abroad for the turnaround.
“In addition to a stable government and an IMF program that works, one thing that helped the economy big times been workers’ remittances which I consider as ‘Pakistan’s oil’,” he said.
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