Pakistan Has Become Good at Attracting Remittances. Can It Earn the Diaspora’s Long-Term Capital?

 

Pakistan received a record $41.6 billion in workers’ remittances in FY26, but turning diaspora savings into long-term investment requires stronger property rights, predictable taxation and institutional trust.

A remittance message crossed my screen recently. The number looked impressive: Pakistan received about $3.7 billion from overseas workers in August 2026.

I work with cross-border payments, so figures like these do not look abstract to me. Behind each transfer sits someone working in Riyadh, Birmingham or Dubai who has decided that part of his salary belongs back home.

Pakistan has spent years improving the channels through which that money comes home.

The harder question is whether we have become good enough at protecting it once the sender wants to do more than support his family.

The $41.6 Billion Number Changes the Conversation

Pakistan received $3.656 billion in workers' remittances in August 2026, according to State Bank data reported on September 9. That was 16.5% higher than August 2025. During July and August, the first two months of FY27, inflows reached about $7.3 billion, up 14.7% from the same period a year earlier.

The previous fiscal year had already broken records.

Workers' remittances reached $41.585 billion in FY26, compared with $38.3 billion in FY25. Saudi Arabia supplied about $9.8 billion. The UAE accounted for another $8.8 billion.

Those are not marginal flows anymore.

Pakistan's provisional merchandise exports in FY26 were about $30.139 billion, according to the Pakistan Bureau of Statistics. Exports fell 5.93% from the previous year.

Net foreign direct investment was much smaller. Pakistan received roughly $1.64 billion in net FDI during FY26, down from about $2.49 billion a year earlier.

The comparison is not like-for-like. Merchandise exports are commercial receipts generated by firms, while remittances are household transfers recorded in the balance of payments.

Still, the scale is revealing.

Pakistan received about $41.6 billion from workers abroad against roughly $30.1 billion in merchandise exports.

Foreign direct investment remained a fraction of either amount.

I do not read that as evidence that remittances are somehow bad. Quite the opposite. They have become one of Pakistan's most reliable sources of foreign currency.

But reliability can become dependence.

Remittances Are a Strength. Dependence Is Something Else.

A worker sending $500 to his parents in Karachi is doing something economically useful.

The dollars enter Pakistan without creating sovereign debt. Families use the rupees for household expenses, education or medical treatment. The foreign currency also helps the financial system meet demand for dollars.

No IMF repayment schedule comes attached.

That is why policymakers celebrate rising remittances, and they have reason to do so.

The problem begins when a country confuses a strong remittance stream with a strong productive economy.

Exports tell us something about what firms inside a country can sell competitively abroad. FDI tells us whether investors are willing to commit capital to productive activity inside the economy.

Remittances tell us something different.

They largely reflect the earning power of Pakistanis outside Pakistan.

The distinction matters.

If Pakistan increasingly depends on income earned by citizens abroad to relieve pressure on its external account, rising remittances can coexist with weaknesses in the domestic productive economy.

FY26 makes that tension unusually clear. Remittances rose to a record while merchandise exports declined. Net FDI also fell sharply.

That is both strength and warning.

Pakistan Has Improved the Plumbing

The government and State Bank deserve credit for one major achievement: sending money through formal channels has become easier.

The Roshan Digital Account, launched for non-resident Pakistanis, allows eligible customers to open Pakistani bank accounts remotely. They can maintain foreign-currency or rupee accounts and use them for banking or investment activities without visiting a branch in Pakistan.

By August 2026, 966,144 Roshan Digital Accounts had been opened. Cumulative funds received through the system had reached $13.906 billion.

That is substantial.

RDA investors can buy Naya Pakistan Certificates. They can also invest in listed shares through Roshan Equity Investment. The platform provides access to certain property and other investment avenues.

The repatriation rules matter even more.

SBP states that RDA funds can generally be sent abroad without prior approval from a bank or SBP. A special limitation applies to capital gains from real estate sold within three years, although the invested principal can be repatriated.

That addresses one of the oldest concerns investors have about emerging markets: getting money in may be easy, but getting it out can become difficult.

Pakistan has also retained the Sohni Dharti Remittance Program, which awards points according to qualifying remittances sent through formal channels. The current structure provides rewards ranging from 1% to 1.75%, depending on annual remittance levels.

The Overseas Pakistanis Foundation adds another layer. OPF provides complaint handling and legal assistance. It runs housing and education programmes, while registered members can access discounts through participating institutions.

These are useful reforms.

But they mainly improve the mechanics of the relationship between Pakistan and its diaspora.

A remittance system needs transactional trust.

Long-term capital needs institutional trust.

Pakistan has made much faster progress on the first.

Sending Money Home Is Not the Same as Investing Here

Consider the difference from the overseas Pakistani's perspective.

A man working in Saudi Arabia may send Rs150,000 home every month because his family needs it.

That decision tells us almost nothing about whether he would risk his life's savings in a Pakistani business.

He may willingly pay his mother's electricity bill while refusing to buy commercial property. He may send money for his children's education yet keep his retirement savings in Dubai.

There is no contradiction.

A remittance is often driven by family obligation. Investment depends much more heavily on expected return and institutional confidence.

Pakistan sometimes treats the two as if they were stages of the same process.

They are not.

The Roshan Digital Account has made investment easier, but its own numbers illustrate an important pattern. By August 2026, RDA had received almost $13.9 billion cumulatively, while the amount classified as net repatriable liability stood at about $3.0 billion.

Outstanding conventional Naya Pakistan Certificates were around $716 million. Islamic certificates stood at approximately $1.33 billion.

Roshan Equity Investment was only about $155 million.

The $155 million figure catches my attention, but it needs careful interpretation. It does not measure all diaspora investment in Pakistan. Overseas Pakistanis may invest through private businesses, property or other channels outside Roshan Equity Investment.

Within the RDA architecture, however, the number shows how small listed-equity holdings remain beside deposits and government-backed certificates.

That should interest policymakers.

Property Shows Where Trust Becomes Personal

Ask overseas Pakistanis what worries them about investing back home and property quickly enters the conversation.

The federal government has recognised the problem.

Parliament enacted the Establishment of Special Court (Overseas Pakistanis Property) Act, 2024 to deal with disputes involving the immovable property of overseas Pakistanis. The law allows special courts to hear such cases.

But there is an important limitation often lost in political announcements.

The Act extends only to the Islamabad Capital Territory.

It is not a nationwide special-court system protecting every overseas Pakistani property owner from Karachi to Lahore.

OPF itself acknowledges the persistence of property disputes and provides legal assistance in cases involving illegal occupation and land-related conflicts.

The existence of a dedicated legal-assistance mechanism is itself revealing.

If the state wants overseas Pakistanis to move from monthly remittances into property or businesses and other productive assets, investment facilitation cannot end at a banking app.

The investor eventually meets a land registrar. Perhaps a court.

Institutional trust is built there.

Tax Policy Has Improved, but Complexity Remains

There are genuine tax concessions.

FBR currently allows eligible NICOP or POC holders treated as non-resident for this facility to obtain filer rates of advance tax under sections 236C and 236K, even when they are not on the Active Taxpayers List, subject to verification.

RDA investments also operate under special tax arrangements designed to reduce compliance burdens.

Naya Pakistan Certificates remain another direct incentive. Current SBP rates vary according to currency and maturity, with separate conventional and Islamic structures.

Pakistan therefore cannot fairly be accused of doing nothing for its diaspora.

It has built banking channels. It has introduced tax concessions and attempted property protection.

The question is whether these initiatives solve the problem that matters most.

Pakistan Wants the Diaspora's Dollars. Does It Want Their Capital?

A country can attract remittances while struggling to attract investment because the two transactions require different kinds of confidence.

The remittance sender asks: Can my family receive this money?

The investor asks a harder question: What happens to my rights after I send it?

That question reaches far beyond banking.

It touches contract enforcement and property ownership. It also reaches the predictability of tax administration.

No reward programme can substitute for those institutions.

Pakistan's policy has become increasingly sophisticated at encouraging money to enter the country. RDA is a serious financial innovation. Formal remittance channels have expanded, while digital wallets have made receiving funds easier.

Pakistan received $41.6 billion in workers' remittances in FY26, while net FDI from foreign investors was only about $1.64 billion.

The categories are different, and the FDI figure does not tell us how much overseas Pakistanis themselves invested. I would not use it as evidence that the diaspora is refusing to invest.

What the contrast does show is something broader.

Pakistan's external account receives vastly more support from labour income earned abroad than from long-term foreign direct investment into productive assets at home.

That is an economic structure worth examining.

I would therefore hesitate before describing every increase in remittances simply as rising "trust".

Trust is not one thing.

A Pakistani in Birmingham can trust his bank to deliver £500 to his mother in Karachi while distrusting the institutions that would protect £100,000 invested in property or a business.

Pakistan has made substantial progress on the first problem.

The second remains much harder.

The next stage of diaspora policy should therefore not be judged only by another remittance record.

The more demanding test is whether an overseas Pakistani feels confident enough to move savings into an asset that cannot be withdrawn with a few clicks.

And before doing that, he is likely to ask a question that no rewards programme can answer:

If I invest rather than remit, who will protect my money once it arrives?