Have you ever wondered why Pakistan’s economy is still sustaining while the people have lost all their confidence in it and the per capita income is not enough to satisfy even the essentials of life? When numerous Pakistanis find it impossible to have their desired jobs, the residents are suffering from economic instability and desperately surviving in these fragile financial circumstances. Nevertheless, there’s still one factor that somehow keeps the economy balanced and is a beacon of hope for the young generation of Pakistan, and that is remittance. This nomenclature originates from the word remit, which means to send back. However, the terminology is usually used in the context of when someone working abroad sends money to their family in their home country.
For 3rd world countries, remittances are the primary means of progress, as they carry a bulk of advantages by themselves. The data says that this inflow of money in the form of remittances often goes to a high peak while the amount of direct investment and international development assistance lags behind. If there seems to be a significant decline in global poverty and progress in the lives of the common man, then huge credit goes to remittance. This piece of research aims to address how remittances are taking the economy to the apex of progress. And in what manner is it improving the lives of people.
The theoretical study supports two arguments concerning the role of remittances in economic progress. One view point lets us see the uprise in the consuming power of the common population, as oversees Pakistani send immense amounts of remittances to their families, making them capable of living pleasantly. The family buys off the basic necessities, comprising food, clothes, medicine, and so on. These remittance holders start satisfying their needs as well as their wishes. The inflows have lifted a large number of people out of poverty by uplifting their level of consumption. A study on poverty reduction without any fear of depression recognized its wide impact on the annual income of the recipient country.
At the same time, the higher remittances inflows may even lower labor force participation in the domestic economy and decrease work efforts, which somehow contradicts the impact of remittances. Other views say that remittances not only escalate the consumption power of citizens but also upswing investment activity. The remittances are likely to act in a similar way as the private capital inflows, which have a proven record of strengthening factor productivity and economic growth. Among those countries whose economies heavily rely on remittances, Pakistan stands 7th in a row. This income, plus numerous other pros attached to the Pakistani diaspora, can be gauged by one point, which states that the balance of payments is kept in check and ultimately the whole economy starts flourishing.
Workers’ remittance inflows are a key source of foreign exchange for Pakistan. Over the last 50 years, Pakistan has witnessed a powerful surge in its trade index and primary income deficit. History narrates that the immense rise in remittances was observed during the early 1970s because of the unwavering efforts of Prime Minister Zulfiqar Ali Bhutto, who actively pursued the immigration of Pakistani labor to Middle Eastern countries significantly as a member of the Gulf Cooperation Council. In the meantime, Gulf countries were enjoying an economic boom, but on the other side, they were facing a huge labor shortage too, depending on the labor force of developing countries. Since then, Pakistan has received US $258.3 billion in remittances.
According to recent data, almost 12.4 million Pakistanis are living abroad, and nearly 96% of them are in Gulf Cooperation Council (GCC) countries. Table below shows the percentage of people living in middle-eastern countries.
| Countries | Percentage of overseas Pakistani residents |
| Saudi Arabia | 62% |
| United Arab Emirates | 16% |
| Oman | 10% |
| Qatar | 7% |
| Bahrain | 3% |
| Kuwait | 2% |
The United States of America, Canada, European countries, Australia, and Malysia are also included in countries where Pakistani workers reside.
Our results of research suggest that the expansion of remittances (in terms of GDP) leads to an increase in per capita income in the economy. This increase in the per capita GDP could be due to the increase in consumption by low-income recipients as well as investment in the economy. Remittances prove to be a major addition to the economy, as in 2022 the money inflow was 31 billion USD and in subsequent years it was 27 billion USD. The technological advancement is also a gift for overseas Pakistanis, as they invest their creativity in their home country through various initiatives. These workers, when they leave the local market, create a vacuum for their fellow citizens and then somehow help to decrease unemployment. These remittances and migrant Pakistani labor are prominent and essential parts of the system and proved to be a factor that keeps our fragile economy running.
The Author , Aleeza Fatima , is a political science student and seasoned content creator with a passion for crafting engaging scripts on diverse topics, including politics, history, and space.
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