Overseas workers are sending approximately $44 billion annually to Pakistan, providing a critical source of foreign exchange that now covers nearly 100 percent of the country’s external financing deficit. These inflows account for around 10 percent of the nation's GDP and have become essential to economic stability.
A portfolio manager at East Capital described the trend in a recent post on X, stating that workers’ remittances have become “Pakistan’s oil”.
The importance of these transfers was highlighted by the severe external financing crisis Pakistan faced in 2023. During that time, foreign exchange reserves covered just 1.5 months of imports, and the country came close to defaulting on its international bonds as external deficits widened and pressure on reserves intensified.
Since that crisis, gross foreign exchange reserves have increased nearly fivefold. Inflation also saw a significant shift, declining from a peak of 38 percent to a low of 0.2 percent before rising to 9.6 percent in the latest reading.
The growth of these inflows has been steady over the past 12 years. Remittances rose from approximately $16 billion in September 2014 to more than $43 billion by September 2026. During this same period, Pakistani equities delivered a 318 percent return in US dollar terms, which is equivalent to an annualized return of 53 percent.
The portfolio manager attributed the broader economic improvement to a combination of government stability, an IMF program and rising remittance inflows.
Meanwhile, the current account balance excluding remittances has experienced significant fluctuations, highlighting the importance of overseas transfers in supporting Pakistan’s external accounts. Without transfers from the estimated 10 million Pakistanis living abroad, the country’s economic position would look considerably different.
