Pakistan’s economic story today is one of striking contradictions. On one side is a government struggling under the weight of public debt, interest payments, taxation pressures and limited fiscal space. On the other is a powerful overseas Pakistani community, particularly from Mirpur division of Pak-occupied Jammu and Kashmir(PoJK), sending money home, building businesses and homes, financing weddings and family functions, and keeping thousands of local economic transactions alive.
Pakistan borrows to keep the government running, while millions of Pakistanis abroad earn the foreign currency that keeps the wider economy moving.
According to reports on the country's FY2025-26 finances, the government recorded a primary surplus of about Rs3.63 trillion and the federal fiscal deficit was around Rs4.8 trillion. But the improvement has not removed the fundamental problem—an enormous debt burden and the cost of servicing it.
The FY2026-27 federal budget reportedly stands at Rs18.77 trillion, with approximately Rs 8.05 trillion earmarked for interest payments. In simple terms, an exceptionally large share of government resources is being consumed by obligations created by borrowing in the past.
That leaves considerably less fiscal room for development, infrastructure, education, healthcare and other public services.
Pakistan's problem is deeper than a single year's deficit. It is structural.The government needs money for salaries, defence, development, subsidies and public services. But its domestic tax base remains relatively narrow. When expenditure exceeds available revenue, the government borrows.
Rising debt increases interest payments. Higher interest payments leave less money for development. The government then faces pressure to raise taxes and levies or borrow again.
Low revenue, borrowing, higher debt,higher interest payments, reduced development space, pressure for more taxation, weaker economic activity, continued borrowing.
Recent fiscal improvement therefore needs to be viewed carefully. A lower deficit is important, but the quality and sustainability of that improvement matter just as much. If fiscal consolidation is achieved mainly by cutting development expenditure, postponing investment or imposing additional burdens on businesses and consumers, the immediate numbers may improve while the economy's future productive capacity suffers. That is the dilemma confronting Islamabad.
There is, however, another side to Pakistan's financial story—its overseas population.Workers and families living in Britain, the Gulf, the United States and other countries send billions of dollars back to Pakistan every year. These remittances provide foreign exchange, support household consumption and help ease pressure on the country's external accounts.
The State Bank of Pakistan(SBP) has reported strong remittance inflows during FY2025-26. The United Kingdom, Saudi Arabia and the UAE are among the major sources.
Mirpur, where migration became an economic model. For decades, Mirpur division has maintained an unusually strong economic and emotional relationship with overseas Pakistanis, particularly the large Mirpuri community in Britain.
The story has historical roots. Migration from the region expanded substantially during the decades surrounding the construction of the Mangla Dam and subsequently developed into an extensive family and community network in Britain.
Today, many Mirpur families effectively live between two worlds. They may spend most of the year in Britain, the United States or the Gulf, but their emotional, social and financial connections remain firmly rooted in Mirpur. They return for weddings, family celebrations, religious occasions and other important events. Property remains an important link with home.
And there is an extraordinary phenomenon that illustrates the depth of that connection: even when death occurs thousands of miles away, some families bring the deceased back to Mirpur for burial and final rites in ancestral graveyards.
For many families, therefore, Mirpur is not simply a place of origin. It remains home. The city of locked mansions
Drive through parts of Mirpur and another dimension of the diaspora economy becomes visible. Large houses and imposing bungalows—some reportedly spread over four or even six kanals—stand as physical symbols of overseas earnings. Yet many remain closed for much of the year.
A caretaker may be the only person living in a mansion whose owners spend most of their time abroad. There is a certain irony in this landscape: houses built with money earned in Britain or America, standing empty while their owners live thousands of kilometres away.
But even an empty house represents an economic chain—construction material, labour, architects, electricians, plumbers, furniture makers, transporters, property dealers and maintenance workers.
The money earned abroad does not remain entirely abroad. A portion finds its way back into the local economy. Perhaps nowhere is this more visible than in weddings. For many overseas Mirpuri families, major family functions continue to be held in Mirpur. Relatives fly in from Britain, America, the Gulf and other countries. Marriage halls become busy. Caterers receive orders. Transport operators get work. Jewellery shops, clothing stores, decorators, photographers, beauty salons, furniture dealers and other businesses benefit.
A wedding may last only a few days, but the money circulating around it can sustain dozens of businesses.
One pound earned in Britain can eventually become income for a hotel worker in Mirpur, a tailor, a taxi driver, a shopkeeper or a caterer.
Community and overseas-business representatives have cited estimates that as much as £2 million a day may flow from the Mirpur diaspora into the region through remittances and overseas visitors' spending.
If such an amount were sustained for around 300 days, it would theoretically amount to approximately £600 million a year. The £2 million figure should therefore be regarded as a community-sector estimate. Yet the absence of a precise figure does not erase the economic phenomenon.
The evidence of diaspora-driven economic activity is visible across Mirpur's property market, construction sector, retail trade, hospitality industry and family spending.
An overseas family's economic contribution does not necessarily arrive as a single bank transfer. It can take many forms:remittances to relatives;construction of houses; purchase of property; investment in shops and businesses; wedding expenditure;
hotel and restaurant spending; education and healthcare expenses; vehicle purchases; furniture and household goods
A builder pays labourers. A shopkeeper pays employees. A hotel buys supplies. A caterer employs workers. A family purchases jewellery or clothing. A transport operator receives fares.
Overseas earnings, remittance/investment, household spending, business turnover, employment, local economic activity
That is why remittances should not be viewed merely as money sent by one family to another. They can become a broader economic stimulus.
The Bank of PoJK has also become part of this remittance infrastructure, offering home-remittance services through international money-transfer channels and maintaining branches in Mirpur and other parts of PoJK.
The importance of formal channels is obvious. Money entering through regulated financial institutions strengthens transparency, provides foreign exchange to the formal economy and creates a record of financial flows.
But PoJK's banking infrastructure also highlights another challenge: how to transform remittance-dependent consumption into productive in town.
This may be the next big economic question for Mirpur.
The overseas community has demonstrated its capacity to generate wealth. The challenge is whether that wealth can increasingly be converted into employment-generating investment. A house may provide shelter and represent family wealth. But a factory can employ hundreds. A technology company can create skilled jobs. A tourism project can generate continuing income. A modern healthcare facility can serve an entire district. A university or vocational institute can create human capital.
Mirpur's overseas wealth could therefore become a much larger development force if a greater share were channelled into small and medium enterprises, tourism, technology, education, healthcare, renewable energy and other productive sectors.
This brings Pakistan's larger financial dilemma into sharp focus. Islamabad needs foreign exchange. It needs tax revenue. It needs investment. It needs economic growth.
And millions of Pakistanis living abroad are already generating the foreign exchange that the country desperately needs.
But remittances cannot permanently substitute for a productive domestic economy.
A country cannot build its future solely on money sent home by its citizens working elsewhere. Remittances are a lifeline, but the ultimate objective must be to create an economy capable of generating employment, exports, investment and tax revenue within Pakistan itself.
That is where Pakistan's fiscal challenge becomes more profound.
Mirpur shows what overseas earnings can do. Islamabad must find a way to make the domestic economy capable of generating the same kind of productive energy.
In Islamabad, billions are consumed by debt servicing. In Mirpur, billions earned abroad continue to circulate through homes, weddings, shops, construction and family businesses.
One represents the cost of Pakistan's past borrowing. The other represents the economic power of Pakistanis working abroad.
The real question for Pakistan is whether it can convert the second into a foundation for a stronger domestic economy—before the first consumes an even larger share of the nation's financial future.