KARACHI – Pakistan’s remittance inflows posted a year-on-year decline in March 2026, signaling emerging external risks, even though overall remittances remained robust amid Iran-US war in the Middle East.
The analysts have raised concerns that escalating geopolitical tensions, especially in the Middle East, could impact future trends in remittance flows.
According to data from the State Bank of Pakistan (SBP), remittances amounted to $3.83 billion in March, down 5% from $4.05 billion in the same month of 2025. However, on a month-on-month basis, inflows saw a 17% rise. Despite the March dip, cumulative remittances for the July-March period of FY26 reached $30.3 billion, reflecting an 8.2% year-on-year increase, underscoring the resilience of remittance inflows.
Analysts attributed the month-on-month growth to seasonal factors, particularly higher transfers ahead of Eidul Fitr, when overseas Pakistanis typically send more money to support household expenses.
Topline Securities noted that the growth in remittances remains steady, driven by an increase in manpower exports, narrowing gaps between formal and informal exchange channels, and ongoing government incentive programs. However, the firm warned that regional instability, particularly the Israeli and US actions against Iran, could pose risks to inflows, especially from the Gulf region. “The geopolitical situation is likely to create challenges for remittance growth in the future,” Topline cautioned.
Waqas Ghani Kukaswadia, Head of Research at JS Global, echoed similar concerns, describing the March spike in remittances as “largely seasonal.” He added that the real trend would become clearer in the coming months, with April and May figures being critical, especially for remittances from Gulf Cooperation Council (GCC) countries. “The future trajectory will depend on whether the ceasefire holds or transforms into a lasting peace agreement,” he noted.
A closer look at the country-wise data reveals Pakistan’s heavy dependence on remittances from Gulf nations. In March, Saudi Arabia sent $918 million, while the UAE contributed $823.7 million, making them the two largest sources. For the July-March period, Saudi Arabia provided $7.08 billion, and the UAE sent $6.27 billion, marking steady year-on-year growth of 3% and 9.9%, respectively.
Other significant sources included the United Kingdom, with $4.60 billion, and the United States at $2.66 billion. However, inflows from the U.S. saw a decline of approximately 5.7% year-on-year, signaling potential shifts in diaspora dynamics. The European Union also showed strong growth, with remittances rising nearly 20% year-on-year to $3.91 billion, largely driven by countries like Italy, Spain, and Germany.
While remittances remain a vital lifeline for Pakistan’s economy, analysts caution that the country’s reliance on a few key regions, particularly the Gulf, exposes it to external shocks such as geopolitical tensions, fluctuations in oil prices, and economic downturns in host countries.
Dr. Abid Qaiyum Suleri, Executive Director of the Sustainable Development Policy Institute (SDPI), stated that while the March dip is not necessarily indicative of stress, the remittance channel remains vulnerable to external pressures. “The March decline is not alarming on its own, but the overall increase year-to-date is reassuring,” he added. Remittances continue to play a crucial role in stabilizing Pakistan’s foreign exchange reserves, supporting the national currency, and sustaining household consumption. Over the past five years, more than three million Pakistanis have migrated abroad in search of better opportunities, often enduring long separations to support their families financially.
The importance of remittances has grown amid Pakistan’s widening external imbalances. According to the Pakistan Bureau of Statistics, the country’s trade deficit widened by 22.65% to $27.81 billion in the first nine months of FY26, up from $22.67 billion during the same period last year. The rising deficit, driven by increased imports and declining exports, has heightened reliance on remittances to help balance the current account and maintain macroeconomic stability.
Looking ahead, analysts project that remittances will remain stable, but external risks could influence future inflows. Topline Securities forecasts total remittances for FY26 to reach $41 billion, reflecting a 7.5% increase from FY25. While reaching $42 billion may be challenging, experts believe that remittances will likely stay above $40 billion, supported by ongoing labor migration and government incentives. However, the outlook remains closely tied to developments in the Middle East. A prolonged escalation in tensions could disrupt labor markets, affecting the incomes of overseas workers and slowing remittance flows. On the other hand, a sustained ceasefire could restore stability in key host economies and support continued remittance inflows.
For now, the March data presents a mixed picture, with strong growth tempered by emerging risks, highlighting the delicate balance that will shape Pakistan’s remittance outlook in the months ahead.
