For years, remittances have been treated as a financial lifeline for Pakistan, offering a cushion against foreign exchange shortages. While their stability is undeniably important, the policy of subsidising remittance flows at such a high cost raises serious questions about long-term sustainability.
Policymakers currently spend around $700 million annually to support remittance inflows. But is this the best use of scarce resources? The answer, increasingly, appears to be no.
The Case for Exports Over Subsidies
Rather than funnelling money into subsidies that only provide temporary relief, experts argue that the same funds could be redirected to build genuine export capacity. This shift would not only generate higher returns but also strengthen the economy’s resilience against external shocks.
Consider the alternatives:
- Training and subsidising manpower for overseas markets to enhance competitiveness.
- Expanding SBP’s low-cost export financing facilities to support exporters.
- Tax breaks and duty reductions on machinery and raw materials to lower production costs.
- Reduced income tax rates for employees in export-driven industries to incentivise labour.
- Incentives for joint ventures that foster exports and promote import substitution.
- Tailored corporate tax regimes designed to benefit exporters directly.
- Skills programmes for freelancers and high-end digital workers to tap into the growing digital economy.
If implemented effectively, such measures could boost exports by an estimated $4–6 billion annually far exceeding the incremental gains achieved through costly remittance subsidies.
The Bottom Line
Remittances will remain an important pillar of Pakistan’s economy. But subsidising them at this scale is neither efficient nor sustainable. Exports, not remittances, must serve as the true engine of growth. Redirecting resources towards export competitiveness can unlock lasting benefits, providing Pakistan with stronger earnings, greater stability, and a clear path to sustainable prosperity.
The message for policymakers is straightforward: Pakistan should not buy temporary comfort through expensive subsidies. Instead, it must invest in building long-term capacity to compete and thrive in global markets.
