World Bank projects positive trend in Pakistan's remittance flow

Remittances, the money sent by individuals working abroad to their home countries, play a significant role in Pakistan's economy. According to the World Bank's 'Migration and Development Brief 40', remittance flow in Pakistan is expected to see a positive trend in the coming years. After a 12% decline in 2023 due to economic challenges, remittances are projected to increase by approximately 7% in 2024, reaching $28 billion. The growth is expected to continue in 2025, with a further 4% increase to around $30 billion.

In 2023, despite the decline, Pakistan ranked among the top five countries for remittances globally, following India, Mexico, China, and the Philippines. The World Bank pointed out that internal issues like the balance of payments crisis and economic challenges contributed to the drop in remittances. Informal channels for money transfers may have also impacted formal remittance flows during that period.

It is crucial for Pakistan to address these challenges and implement necessary reforms to attract Foreign Direct Investment and support formal remittance flows. Remittances not only help in stabilizing the external account but also boost economic activity and provide vital income to remittance-dependent households.

In the first 11 months of FY24, workers' remittances to Pakistan increased by 7.7% compared to the previous year. Pakistan, along with Sri Lanka, stands out in South Asia as countries heavily reliant on remittances, each accounting for 8% of GDP.

Looking at the broader South Asian region, remittances grew by 5.2% in 2023, reaching $186 billion. India led the growth with a 7.5% increase to $120 billion, supported by strong labor markets in the US and Europe. However, reduced outflows from GCC countries due to oil price fluctuations contributed to an overall slowdown. Remittance flows are expected to rise by 4.2% in 2024.

The World Bank emphasized that economic conditions in major remittance-receiving countries like India, Pakistan, and Bangladesh will significantly impact remittance growth in South Asia. A weak economic recovery in Pakistan and Bangladesh could lead to a shift towards informal money transfer channels, potentially affecting remittance growth rates.

Remittances are a vital source of income for many households in Pakistan and play a crucial role in supporting the economy. As the country works towards addressing economic challenges and implementing reforms, the future looks promising for remittance flows. It is essential for Pakistan to focus on creating a conducive environment for formal remittance channels to ensure sustainable growth and stability in the remittance sector.