World Bank Forecasts 7% Growth in Pakistan's Remittance Inflows

World Bank Forecasts 7% Growth in Pakistan's Remittance Inflows

islamabad. Pakistan's remittance inflows are projected to recover and grow by about 7 percent in 2024, reaching $28 billion, with an additional 4 percent increase to around $30 billion expected in 2025, according to the World Bank’s latest report, “Migration and Development Brief 40,” released on Wednesday.

In 2023, Pakistan experienced a significant decline in remittance inflows, which fell by 12 percent to $27 billion due to weak economic conditions, including a balance of payments crisis and other challenges.

Despite the drop, Pakistan ranked among the top five recipients of remittances globally in 2023, alongside India ($120 billion), Mexico ($66 billion), China ($50 billion), and the Philippines ($39 billion).

The report highlighted that although there was strong demand for labor in countries like the USA and OECD nations, Pakistan's internal economic struggles led to the significant drop in remittances. A notable portion of remittances likely flowed through informal channels due to robust labor market conditions in destination countries, contributing to the reduction of formal remittance flows.

The report emphasized the impact of recent economic crises in Pakistan, noting that delays in economic reforms deterred Foreign Direct Investment (FDI) and penalized formal remittance flows until corrective actions were taken by the government.

Remittances are crucial for supporting Pakistan’s external accounts, stimulating economic activity, and boosting the disposable incomes of households reliant on these funds. In the first 11 months of FY24, workers’ remittances saw an inflow of $27.093 billion, marking a 7.7 percent increase compared to the $25.146 billion recorded in the same period of FY23.

The World Bank’s report further revealed that, with remittances constituting 8 percent of its GDP, Pakistan, along with Sri Lanka, was one of the most remittance-dependent countries in South Asia.

Overall, remittances to South Asia grew by 5.2 percent in 2023, reaching $186 billion, though this was a decrease from the 12 percent growth seen in 2022. India led this growth with a 7.5 percent increase, supported by strong labor markets in the United States and Europe.

Conversely, reduced outflows from GCC countries, affected by declining oil prices and production cuts, slowed the growth rate. Projections indicate a 4.2 percent growth in remittances to the region in 2024.

The report concluded that domestic economic conditions in South Asia’s largest remittance recipients—India, Pakistan, and Bangladesh—would be critical in driving future remittance growth. However, a weak economic recovery in Pakistan and Bangladesh could lead migrants to prefer informal money transfer channels, potentially hampering remittance growth.