Pakistan’s exchange companies sold $6 billion to banks in FY26, a figure that underscores the country’s growing reliance on remittances even as regulatory pressure threatens to shrink the sector. The disclosure, made by industry representatives on Saturday, comes amid record inflows of $41.6 billion from overseas workers—now exceeding export earnings—but also reveals a widening gap between official targets and on-the-ground investment realities. Main Developments Exchange companies averaged $500 million in monthly sales to banks during the fiscal year, according to Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan. The State Bank of Pakistan, however, shut down at least five exchange companies in FY26 for violating its rules, and one firm voluntarily surrendered its licence. Currency dealers say over-regulation by the central bank is squeezing profit margins, prompting more companies to consider closing. The State Bank has encouraged banks to establish their own exchange companies, with 14 banks now operating such entities. At the same time, the central bank has withdrawn some incentives previously offered to banks to attract remittances. Read also: Gilgit-Baltistan to Present Delayed Q1 Budget on Monday Background Pakistan’s reliance on remittances has deepened each year, with FY26 inflows of $41.6 billion surpassing export earnings. The incentives withdrawn by the SBP—valued at Rs120 billion—had drawn scrutiny from the International Monetary Fund, which influenced their discontinuation. The government has been pushing to boost labour exports, with the prime minister recently directing foreign missions to secure jobs for Pakistanis abroad. The exchange company sector has historically been a key conduit for remittance flows, but tighter oversight and competition from bank-owned firms are reshaping the landscape. Business circles have expressed surprise that while officials talk of achieving $60 billion to $100 billion in exports, no concrete steps have been taken to achieve those targets. Why It Matters The $6 billion figure represents a significant portion of Pakistan’s foreign exchange reserves, yet the sector’s contraction could reduce the efficiency of remittance flows. Without investment in manufacturing, exporters warn that export targets will remain aspirational. “Neither domestic nor foreign investments improved in FY26,” said one exporter, noting that the business community has long advised that manufacturing investment is a prerequisite for export growth. The SBP’s withdrawal of incentives and its push for bank-owned exchange companies may streamline oversight but could also reduce competition and drive smaller operators out of business. This dynamic could ultimately affect the cost and speed of remittance transfers for millions of Pakistani workers abroad. What’s Next More exchange companies are expected to surrender their licences if regulatory burdens persist, potentially consolidating the sector under bank control. The government’s efforts to enhance labour exports face an uncertain timeline, and the gap between export rhetoric and investment reality may widen. The IMF’s influence over incentive structures suggests that fiscal discipline will continue to constrain policy options, while the SBP’s enforcement actions signal a long-term shift in how remittances are channeled into the formal banking system.