Remittance flow in Pakistan is expected to recover and grow at about 7% to reach $28 billion in (calendar year) 2024 and increase another 4% to about $30 billion in 2025, said the World Bank in its report ‘Migration and Development Brief 40’ released on Wednesday.
During 2023, weak economic conditions in Pakistan including a balance of payment crisis and other difficulties resulted in remittance inflows plummet by 12% to $27 billion compared to the same period in preceding year, said the World Bank.
As per the report, Pakistan emerged among the top five recipient countries for remittances in 2023.
“The top five recipient countries for remittances in 2023 are India with an estimated inflow of $120 billion, followed by Mexico ($66 billion), China ($50 billion), the Philippines ($39 billion), and Pakistan ($27 billion),” read the report.
However, despite demand for labour in foreign countries including USA and OECD, which could have favored remittance flows to Pakistan, “weak internal conditions due to a balance of payments crisis and economic difficulties triggered remittances to plummet 12% to $27 billion in 2023 compared with more than $30 billion in 2022”.
World Bank projects 2.3pc GDP growth rate
The World Bank said a significant share of remittances have likely flowed to Pakistan through informal channels in 2023.
“Considering robust labor market conditions in destination countries, it is likely that a significant share of remittances flowed to Pakistan through informal channels in 2023, leading to the drop in formal remittances,” said the report.
The World Bank said recent economic crises in Pakistan demonstrated that reform delays were not only a deterrent to Foreign Direct Investment (FDI), “but also equally penalized formal remittance flows to these countries until their governments undertook corrective actions”.
Pakistan receives record remittances of $3.24bn in May, up over 54% YoY
Home remittances play a significant role in supporting the country’s external account, stimulating Pakistan’s economic activity as well as supplementing the disposable incomes of remittance-dependent households.
During first 11 months of FY24, workers’ remittances recorded an inflow of $27.093 billion, an increase of 7.7% as compared to $25.146 billion remittances recorded during 11MFY23.
The report revealed that with a share of 8% of GDP, Sri Lanka and Pakistan tied for the second position as the country most dependent on remittances in South Asia.
Meanwhile, remittances to South Asia grew by 5.2% in 2023, reaching $186 billion, tapering off from a 12% increase in 2022. Growth was driven by India, which saw a 7.5% increase to $120 billion, supported by strong labor markets in the United States and Europe.
Reduced outflows from the GCC countries, impacted by declining oil prices and production cuts, contributed to the slowdown. Flows are projected to grow by 4.2% in 2024.
“Besides external factors, the domestic economy conditions prevailing in South Asia’s three largest recipients—India, Pakistan, and Bangladesh, that collectively receive 91% of the total remittance flows to South Asia—will play a fundamental role in driving remittance growth.
“The single most important risk on the downside is from a weak economic recovery from the recent crises in Pakistan and Bangladesh that would motivate migrants to opt for informal over formal money transfer channels, resulting in lower remittance growth,” World Bank said.