Pakistan achieved a staggering $2.1 billion current account surplus in fiscal year (FY) 2024-25, marking the largest surplus in 22 years through record-high remittance inflows.

 

According to reports, while remittance inflows from migrant workers prop up Pakistan’s economy, the loss of human capital downgrades the productivity of the domestic labour force. Data from the Pakistan Institute of Development Economics (PIDE) has revealed that in terms of human capital migration, Pakistan ranks third in South Asia and sixth globally.

 

Pakistani workers have been heading abroad in large numbers for better economic prospects as the country remains beset by political uncertainty, economic instability and a lack of opportunities. Reports reveal that the emigration of highly skilled professionals jumped up by a staggering 26.6 percent between 2022 and 2023. 

 

On the surface, higher emigration levels seem to be a beneficial outcome for Pakistan. This is because a decrease in the supply of workers in the domestic labour market results in an increase in wages as companies offer higher salaries to attract the smaller number of workers left in Pakistan.

 

Moreover, an uptick in emigration levels caused remittances to balloon to $38.5 billion in 2024-25 after witnessing a 25.2 percent increase on a year-on-year (YoY) basis. This has helped stabilise the State Bank of Pakistan’s (SBP) foreign exchange reserves along with improving the standard of living for the families of migrant workers.

 

However, reports suggest that the surge in remittances conceals the true cost of brain drain on Pakistan’s economy. For reference, brain drain is the phenomenon wherein highly skilled individuals emigrate from a particular country, often in large numbers.

 

As per reports, Pakistan invests a large sum of money annually into training and educating these workers who move abroad. When these workers emigrate, Pakistan essentially loses the funds invested in that individual. 

 

This “investment” can come in various forms, such as infrastructure utilised by emigrants during their time in Pakistan, subsidised education and training. 

 

While Pakistan bears the cost to attract highly skilled workers, it loses out on tax revenues from their incomes as they choose to work abroad. As such, every emigrant is a sort of bad investment for the government as their expenditures do not yield any revenues.

 

Calculations by an economist suggest that Pakistan could be losing upwards of $4.2 billion to foreign countries as a result of brain drain. However, it is unlikely that the emigration of highly skilled workers will halt, as a survey conducted by Gallup Pakistan in 2023 revealed that 62 percent of young workers wanted to work abroad if they had the opportunity to do so.