Pakistan’s external economy is walking a tightrope. Despite temporary relief from a surge in remittances and renewed International Monetary Fund (IMF) support, the structural vulnerabilities of the country’s external sector have only deepened. Mounting debt, low reserves, record-high profit repatriation, and geopolitical aftershocks are coalescing into a volatile mix as fiscal year 2024-25 draws to a close.

In the first eleven months of FY25 (July 2024–May 2025), overseas Pakistanis sent home $34.9 billion, according to the State Bank of Pakistan (SBP) — a remarkable 28.8 per cent increase from the previous year. This remittance windfall has been pivotal in covering the growing trade deficit and defending the rupee.

However, the sustainability of this support remains uncertain. Shifting labour market dynamics and great uncertainty added to the economic prospects of the Gulf Cooperation Council nations affected by the Iran-Israel war, plus heightened concerns about the cyber security of financial transactions, pose risks to these inflows.

In parallel, the IMF has released $1bn under its Extended Fund Facility, following Pakistan’s compliance with key reform benchmarks. The country has also signed a new $1bn loan agreement with Middle Eastern financial institutions, offering short-term support but adding to its debt stock.........

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