Brain drain to wallet gain: Remittances expected to hit 34 billion dollars

Businesses watch with great pleasure as the endless inflow of remittances hits a four-month high. With the monthly remittance figure crossing $3 billion, there will be significant positive implications for both businesses and the economy as a whole.

This remittance rush was to be expected, though, as over two million Pakistani citizens emigrated out of Pakistan in the past three years to seek better employment opportunities.

The concept of brain drain - migration of skilled and educated people to other countries for better opportunities - is perceived to be a negative thing.

For a country like Pakistan, however, it is also a blessing in disguise.

The inflow of foreign reserves keeps the economy afloat by reducing Pakistan's current account deficit. With Islamabad’s persistent efforts, the current account deficit sits at a low of $681 million in FY 23-24 i.e. 79 per cent lower than the previous year. With the high inflow of foreign reserves that Pakistan is experiencing now from remittances, the current account just might end up being balanced.

The remittance situation is so positive that experts have begun to compare it to the large inflows that were seen during the Pakistan Tehreek-e-Insaf (PTI) led government.

Under former Prime Minister Imran Khan, remittances surged past $31 billion to an all-time high in 2022. However, remittances are projected to cross an astounding $34 billion.

While this would be great news for lawmakers, the real winners here will be the businessmen of the nation. This is because these large inflows of money are often sent back to Pakistan with the intention of helping struggling family members back home. 

This money can then be used to purchase goods and services from businesses in the local economy. These increased sales directly translate into an increase in the profit levels of business owners.

Overseas Pakistanis have also historically sent money back home for the purchase of land or the construction of houses. The recent rise in remittances will help save the real estate and construction sectors.

The real estate market has seen a severe slump. Even the largest residential societies have seen their plots of land diminish in value and price. 

Overseas Pakistanis, however, are usually looking to make long-term investments. This lower price tag is precisely what makes purchasing land an attractive proposition – as it will appreciate over time.

If this remittance money is directed towards the purchase of land, the country might see a revival of the real estate sector. Moreover, expatriates' construction of houses will invaluably benefit businesses involved in the provision of building materials and supplies.

For now, Pakistan benefits from each outbound flight carrying emigrants.

After all, the remittance levels are of huge help to Pakistan, but only time will tell if the inflows of foreign reserves were worth the price that had to be paid: Brain drain.