The State Bank of Pakistan (SBP) is anticipating an improvement in remittance inflows to Pakistan as labor migration has significantly increased in recent years.
Compared to the preceding two years, Pakistan has seen a notable rise in labor migration in FY22 and FY23. Data from the Bureau of Emigration and Overseas Employment (BEOE) reveals that this surge is not unprecedented, as the country has experienced similar spikes in the past, notably during FY15 and FY16.
In FY23, around 0.8 million Pakistani workers were registered through the Bureau of Emigration and Overseas Employment (BEOE) and the Overseas Employment Corporation (OEC). Of these, 55.6 percent were registered for Saudi Arabia, 19.3 percent for the UAE, 8.6 percent for Oman, and 7.8 percent for Qatar.
However, it’s worth noting that workers’ remittances experienced a decline in FY23 for the first time in six years. After reaching a record high of $31.3 billion in FY22, remittances dropped by 13.6 percent to $27.0 billion in FY23. This decline affected all major remittance corridors except the United States.
According to a recent SBP report, the composition of Pakistan’s labor migration flow by skills shows that highly-qualified and highly-skilled labor forces each account for an average of only 2.0 percent of the overall emigration between FY20 and FY23. The number of migrants under each skill composition increased during FY23 and FY22 following a significant dip in FY21. The recent surge in emigration may be attributed to the post-pandemic resumption of international travel and the opening up of host economies.
Migration under occupational trades identified as highly-qualified and highly-skilled has been increasing between FY20 and FY23. However, due to their small proportion of emigrants, they have had a limited impact on remittances.
Most workers recruited for overseas employment in FY23 were in blue-collar jobs. Additionally, a comparison shows that remittances in US dollars declined in FY23, while remittances in Pakistani Rupees (PKR) were on an upward trend.
This indicates that exchange rate depreciation has led to lower remittances in US dollars, as a lower dollar amount results in higher remittances in rupee terms compared to the previous year. The dominance of blue-collar workers in the migration mix results in a lower average remittance amount in US dollars.
