ICMA urges Pakistan to diversify beyond record remittances

Pakistan must use record workers’ remittances as a foundation for diversifying its economy rather than relying on overseas transfers as a long-term source of external stability, the Institute of Cost and Management Accountants of Pakistan said in an analysis.

Pakistan received a record USD 41.59 billion in workers’ remittances during fiscal year 2025-26, an increase of USD 3.3 billion from the previous year. The inflows helped ease pressure on foreign exchange reserves and the balance of payments and contributed to improved external stability, ICMA said.

The record remittance performance was followed in August by Pakistan’s sovereign credit rating upgrade by Moody’s from Caa1 to B3, reflecting improvements in external buffers, easing financing pressures, fiscal stabilization and economic management.

However, ICMA said the record remittance inflows should be viewed as an opportunity to pursue broader economic reforms rather than as a substitute for export growth and investment.

“Record remittances should not be viewed merely as a financial statistic,” an ICMA Pakistan spokesperson said. “They represent a valuable window of opportunity. The real measure of success will be Pakistan’s ability to use this stability to expand exports, attract investment, and build a more resilient economic model that relies on multiple engines of foreign exchange earnings.”

Why does ICMA want Pakistan to diversify?

Despite the increase in remittances, Pakistan’s combined goods and services trade deficit widened significantly during fiscal year 2025-26. Remittances offset a substantial part of the external gap, but the current account moved from a surplus in fiscal year 2024-25 to a modest deficit in fiscal year 2025-26, highlighting the risks of relying heavily on such inflows, ICMA said.

The institute said Pakistan’s emerging digital economy provides an important opportunity for diversification. The country generated more than USD 10 billion in services exports, while freelance export receipts also recorded strong growth.

The development indicates that Pakistan’s external earnings are gradually expanding beyond traditional goods exports and workers’ remittances, ICMA said, adding that digital and freelance services could become increasingly important sources of foreign exchange.

Moody’s upgrade also reflected broader improvements in Pakistan’s economic position, but the rating agency continued to identify the country’s dependence on remittance inflows, narrow export base and ongoing financing requirements as key vulnerabilities, according to ICMA.

The institute said the next phase of economic policymaking should therefore focus on converting stabilization into competitiveness by strengthening export capacity, expanding digital and freelance services, attracting productive investment and diversifying sources of foreign exchange.

ICMA said remittances remain an important source of income for millions of Pakistani households and a critical pillar of external resilience. However, sustained improvements in sovereign creditworthiness would require stronger exports, greater competitiveness and reduced dependence on any single source of foreign exchange.

“The challenge is no longer simply maintaining external stability,” ICMA said. “The challenge is converting stability into sustainable growth, investment, and long-term economic strength.”

The institute said remittances had helped lay the foundation for Pakistan’s economic stabilization, but diversification and competitiveness would determine whether the country could build a more durable growth model.