Pakistan is one of the greatest remittances receiving country in the world. The economy of Pakistan is greatly influenced by the foreign capital that flows into the country that eventually stabilizes the economic conditions of families and nations as well. There are about 10 million Pakistanis working in rich nations like Saudi Arabia, USA, UK, Canada, Switzerland etc. Saudi Arabia has the highest rank among the countries where people from Pakistan work. The funds transferred from other countries enter in both formal and informal ways.
Remittance plays a crucial role in the economy of Pakistan. Firstly, the needs of the families of foreign workers are dependent on these funds. These families purchase goods that contribute to the consumption side of the economy. Secondly, the funds transferred, if kept in the form of savings, can help banks to give loans which encourage investment for both large and small scale investment. Remittance affects the economy both directly and indirectly by sharing a sizeable part of the Gross National Product.
The foreign capital inflow is also one of the advantages provided by remittances. the fact that Pakistani rupee has a lesser value than other currencies like Saudi riyal, US dollar, European euro and other currencies of developed countries makes it advantageous for the economy of Pakistan.
Besides being the greatest remittance receiving country, it is necessary that the state of Pakistan should develop effective policies that incentivize the foreign currency inflow and it is crucial that Pakistan should also consider the cost-benefit of exporting its skilled labour to other countries.