Money transfers back to Pakistan are an important aspect of the local economy. It has a substantial impact on its long-term viability and growth. The monies that Pakistani employees send home each month—an average of $2 billion—have profoundly transformed the country's economy and society. This blog article will provide an overview of what remittances are and how they impact Pakistan's economic growth.

What Exactly Is A Remittance Payment?

Some people send money as a gift or as payment to others. This is known as remittance. For the sake of argument, any account cost might be seen as a refund. The term "remittance" is derived from the verb "remit," which meaning "to pay back."

Economic Consequences

Remittances have been a lifeline for Pakistan, helping to balance the country's current account deficit, which is produced by the gap between what it sells and what it buys. In 2018, for example, the government received $20.9 billion in payments, which helped balance the effects of its $60.2 billion import bill with its $23.6 billion exports. From 1977 to 2019, Pakistan received an amazing $258.3 billion in payments. This is in contrast to its $44.5 billion in FDI and $480.1 billion in exports.

Historical Context

The story of remittances in Pakistan is inextricably linked to the emergence of the Gulf Cooperation Council (GCC) countries following the 1973 oil crisis. Saudi Arabia and the United Arab Emirates lead the way, sending more than half of the money that Pakistan receives back home. They also employ approximately 96% of Pakistan's foreign workers in the energy, construction, and infrastructure industries.

You now understand what remittances are and why they are crucial to Pakistan's economy and society. It stimulates growth, enhances living standards, and promotes progress. Foreign workers will continue to have an impact on Pakistan's future because of their huge contributions.

What Is A Remittance And its Role in Economic Development in Pakistan