Moaaz Manzoor

Pakistan’s rising remittances provide temporary economic relief, but overreliance on them creates complacency, masking structural weaknesses, discouraging industrial growth, and necessitating a strategic shift toward skilled migration, export expansion, and productive investments for long-term stability, reports WealthPK.

In January 2025, remittances crossed $3 billion again, marking a 25.2% increase compared to January 2024. Cumulatively, from July 2024 to January 2025 (7MFY25), remittances reached $20.8 billion, reflecting a 31.7% year-on-year rise. Saudi Arabia remained the top contributor, followed by the UAE, the UK, and the USA.

Speaking with WealthPK, Senior Research Economist at the Pakistan Institute of Development Economics (PIDE) Dr. Junaid Ahmed highlighted that while the rising remittances provided the much-needed cushion for economy, their over-reliance posed long-term risks. “Remittances help stabilize the economy temporarily, but they cannot serve as a substitute for sustainable economic growth,” he said.

He emphasized that Pakistan’s migration pattern had remained largely unchanged since the 1970s, with a heavy reliance on low-skilled labor exports. In contrast, countries like India have strategically positioned their workforce in high-value sectors worldwide. Dr. Ahmed pointed out that while remittances offered immediate financial relief, they did not address Pakistan’s structural economic challenges.

“Other countries have leveraged their diaspora by integrating them into specialized and high-paying sectors, which in turn strengthens foreign direct investment (FDI) and economic linkages,” he explained. He stressed that Pakistan must develop structured policies to enhance the skill set of its overseas workforce, ensuring future migration trends are aligned with the global economic demands.

“A shift toward skilled migration — focusing on fields such as IT, engineering, and financial services — can help improve both the volume and quality of remittances in the long run.” Syed Ali Ehsan, Deputy Executive Director at the Policy Research Institute of Market Economy (PRIME), underscored the risks of overreliance on remittances, arguing that easy inflows created complacency, discouraging efforts toward industrial growth and export diversification.

“Remittances mask structural weaknesses, creating a false sense of stability,” he explained. He also warned of their volatility, as they remained vulnerable to the global economic shifts and policy changes in the host countries. Moreover, much of the remitted money fuels consumption rather than being channeled into productive investments, limiting long-term economic benefits. Ehsan emphasized the need for industrial expansion and export-led growth to reduce remittance dependence and create domestic employment.

He also suggested that the expatriate investment should be directed toward productive sectors to maximize economic impact. “Skill development and education will enable Pakistanis to secure higher-value jobs abroad, increasing remittance quality rather than just quantity,” he added. While the recent surge in remittances offers economic relief, Ehsan stressed that Pakistan needed sustainable policies to convert these inflows into long-term development rather than relying on them as a temporary lifeline.

While remittances provide a crucial financial buffer, they are not a substitute for a resilient economic model driven by industrialization, export competitiveness, and human capital development. Without a strategic shift in policy, Pakistan risks maintaining a cycle of dependency rather than fostering long-term economic stability.

Credit: INP-WealthPk