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The Significance Of Pakistan Remittances In Its Financial Independence

August 13th, 2019

The significance of Pakistan remittances in its financial independence

Remittance inflows can contribute significantly to a country’s economic well-being. Evidence demonstrates that monetary remittances – particularly in developing countries like Pakistan – play a significant role in alleviating poverty.

Studies such as the one conducted by Abdul Qayyum have shown that Pakistan’s remittance inflows help in not just economic growth but also in improving social conditions. Districts like Punjab, Sindh, and Baluchistan, in particular, have reaped the benefits of remittances to Pakistan. This should come as no surprise, given that Pakistan is a relatively impecunious economy with an approximate population of 9 million spread across the world.

Pakistan remittances serve as a catalyst for investment in the country, which in turn induces a cycle of growth-promoting production, exports, consumption, income, and further investment in turn. The Pakistan remittance initiative was set up with this in mind.

Pakistan Remittance Initiative

Despite the country receiving sizeable remittances year on year, the Pakistan remittance initiative was set up as a joint initiative by the State Bank of Pakistan, Ministry of Overseas Pakistanis, and the Ministry of Finance to prevent a potential decline in remittance inflows in the future. This is done through the provision of a recognised ownership structure to facilitate remittance inflows.

Since remittances remain key since Pakistan’s independence, the initiative helps attract foreign investment in Pakistan while tackling the issue of informal channels for remittances. In collaboration with the Federal Investigation Agency (FIA), the State Bank of Pakistan has successfully limited the inflow of remittances through informal channels known as hundi and hawala and hopes this will promote the use of formal channels.

It has launched the Asaan [Easy] Remittance Account and an m-wallet scheme to help facilitate remittance inflows through formal channels and create a convenient platform for nationals residing abroad to transfer funds. Since inflows have been on the decline from countries that have historically contributed a significant share of Pakistan remittances, it is crucial for the nation that this initiative works.

Source Of Pakistan Remittances

When looking at Pakistan remittances by country, it is found that the most substantial chunk of investments comes from the Middle East and Gulf countries. Here is a list of Pakistan remittances by country in descending order for the month of April 2019.

  • Saudi Arabia – $427.82 million
  • UAE – $372.43 million
  • UK – $280.02 million
  • USA – $269.56 million
  • GCC countries – $175.44million
  • European Union – $48.19 million

As clearly evidenced, the most important source of remittances for Pakistan is Saudi Arabia. This is because the latter faces a lack of supply in skilled labour, while Pakistan is a great source for labour.

Because of the increasing number of nationals are moving abroad for job opportunities the Pakistan remittance initiative seeks to boost foreign investment in Pakistan by facilitating cheaper, faster, and more convenient and efficient flow of remittances.

Data of Pakistan remittances by country indicates that remittances from other countries such as Malaysia, Switzerland, Norway, Japan, Canada etc. contribute a significant amount totalling to $205.43 million altogether.

Factors Inhibiting Remittance Inflow

Across the remittance industry, high transaction costs hinder inflow and outflow. This is why the United Nations has set a target to reduce service fees that average 7% at present to 3% by 2030.

Other important factors to consider when transferring money are the speed of transfer, the strength of connectivity of the network through which the funds are transferred, the reliability of the remittance service provider, and the versatility of modes of transfer. The general inability of most money transfer services to satisfy these criteria plays a role in reducing remittance inflows in the country.

The Role Of Illegal Recruitment Agencies

Given the importance of remittances to Pakistan’s financial independence, it is important for the country to curb issues that inhibit remittance inflows. Apart from the factors cited earlier, a major factor that restrains remittance inflow is the role played by illegal recruitment agencies. These agencies hamper worker migration from Pakistan by charging an ‘intermediary fee’ that can be up to 20 times the labourer’s monthly earnings.

In order to grow remittance inflows, several issues must be curbed. One is the growth of illegal recruitment agencies. Pakistan can do this by establishing strong relationships with the destination country to achieve bilateral coordination. This will help provide better employment opportunities to workers without the risk of them being exploited.

Ever since its independence, Pakistan’s scope for sustained economic growth and welfare has been dependent on remittance inflows. So it is imperative to address any issues that impede this urgently.



1. https://www.researchgate.net/publication/46447075_Impact_of_Remittances_on_Economic_Growth_and_Poverty_Evidence_from_Pakistan

2. https://www.dawn.com/news/1401805

3. https://www.khaleejtimes.com/remittances-keep-pakistans-economy-afloat

4. https://www.thenews.com.pk/latest/469511-pakistan-foreign-remittances-grow-845-percent-to-179-billion-in-10-months

5. https://www.xpressmoney.com/blog/industry/how-to-choose-the-best-way-to-send-money/