The $41.6b remittance divide

KARACHI:

Sardar Liaquat Khan left his home nestled among the middle Himalayas near Banjosa Lake in Kashmir and his one-month-old bride to seek a better life. Three years later, he has not returned yet.

His life is a quintessential story of the pain and gain behind Pakistan's remittances.

During this time, he has helped his four brothers build houses, open four shops and buy land. His own house is now under construction. His wife waits, collecting household appliances and essentials in the hope that one day they will finally begin the married life they planned before he boarded a flight to Saudi Arabia.

"We Kashmiris leave our heaven to make our world," he says.

Liaquat's story mirrors the lives of millions of Pakistanis who have left their families in search of economic opportunity abroad. Most come from Punjab, Khyber-Pakhtunkhwa (K-P) and Azad Jammu and Kashmir (AJK). They spend years away from parents, spouses and children, sacrificing family life to earn incomes that would have been impossible at home. In return, they send billions of dollars back every year, supporting households and the country's fragile economy. For many young Pakistanis, adulthood presents a stark choice: remain in a country where opportunities are scarce or leave everything familiar in pursuit of a better future overseas. Staying often means lower incomes and limited prospects. Migration demands emotional sacrifices that cannot be measured in financial terms.

A dependable economic lifeline

Workers' remittances have been one of Pakistan's most reliable economic supports since the early 1970s, when the country was rebuilding after the separation of erstwhile East Pakistan, now Bangladesh. Over the decades, the inflows have risen steadily. During FY2025-26, Pakistan received $41.6 billion, marking an 8.6% increase from the previous year. It was a milestone, marking the first time this number was crossed.

Saudi Arabia remained the largest source, with around $829.6 million followed by the UAE ($792.2 million), the UK ($514.9 million) and the US ($296.8 million).

Unlike external borrowing, remittances create no debt. Unlike portfolio investment, they do not flee overnight. They represent the hard-earned savings of workers on construction sites in Riyadh, factories in Dubai, hospitals in London and restaurants in New York.

The north-south divide

This windfall, however, is creating a massive divide. Remittances concentrate overwhelmingly in Punjab, K-P and AJK. Sindh and Balochistan receive a much smaller share, next to none.

The State Bank of Pakistan does not issue a detailed breakdown of remittance inflows. Without such data, economists must rely on proxy research methods.

Applied economist Dr Jazib Mumtaz of the Institute of Business Administration notes that roughly half of Pakistan's migrants originate from Punjab, about one-quarter from K-P, around 9% from Sindh and the rest from other regions. If remittances follow the same pattern, Punjab alone receives nearly half of all inflows while Sindh receives only a fraction.

Cultural and structural factors explain much of the imbalance. Punjab and K-P have developed long-standing migration networks over generations. Families already settled abroad help relatives secure jobs, accommodation and documentation. Many communities in Sindh have historically relied more on agriculture and local employment, leaving weaker overseas networks. Aadil Nakhoda, assistant professor at IBA specialising in international trade, observes that the flows remain heavily concentrated in K-P and Punjab because of the nature of semi-skilled and unskilled labour migration. In AJK, the pattern is more mature, shaped by multi-generational links with the UK.

Punjab, K-P, AJK's well-established overseas networks

Outside of agriculture and major industrial centres like Faisalabad, Sialkot, Gujranwala, and Peshawar, job seekers in northern Pakistan typically have three options: take a government job, work abroad, or open a shop that relies on spending from families supported by overseas remittances. Even government employment now relies indirectly on these remitters.

In many districts, migration has become an intergenerational strategy. One successful migrant helps several relatives follow the same path. Overseas labour migration from Pakistan is concentrated in Punjab, Kashmir and K-P, and remittance flows largely mirror this pattern. Access to overseas employment is influenced by access to information, recruitment channels, social networks, skills, documentation, and financial resources. These factors tend to be more readily available in some areas than others, according to the International Organisation for Migration (IOM), the United Nations agency for migration.

"These factors are more common in Punjab and the settled areas of K-P than in much of interior Sindh," highlighted IOM in an email communication with The Express Tribune. Karachi is an exception within Sindh, generating significant outward migration due to its size, economic importance, and long-standing international connections. In K-P, longstanding traditions of labour mobility and well-established overseas migrant networks have further facilitated migration.

Sindh, despite hosting Karachi, the country's financial and commercial capital, has not built a comparable migration ecosystem. Karachi contributes between 35 and 60% of national tax revenues and more than half of Pakistan's exports. Yet these macroeconomic figures often mask the everyday struggles of ordinary residents.

A large share of workers earn wages that barely cover food, rent and transport. For many young people in lower-income neighbourhoods, overseas employment appears as the only realistic route to upward mobility. But this route is not available for Karachi's youth, which is one of the reasons behind mobile snatching and other street crimes. Migration therefore represents more than an economic calculation. It is a decision to exchange years with loved ones for the hope that future generations will not have to make the same sacrifice.

Structural barriers in the south

The absence of a strong remittance culture in Sindh has consequences that extend beyond household incomes. Its agriculture has suffered from persistent water shortages and declining productivity. Industrialisation has failed to generate broad-based employment. Overseas employment could have become a third income stream for thousands of households. Yet successive governments of Sindh have done little to integrate labour migration into provincial economic planning.

Labour migration is not simply about workers leaving the country. It also creates an ecosystem of recruitment agencies, vocational institutes, language centres, documentation services and financial institutions. As migration expands, it generates demand for technical education and skills training. The International Labour Organisation argues that the regional disparity is largely structural rather than demographic. Punjab and K-P have developed denser networks of licensed Overseas Employment Promoters, technical and vocational institutes, assessment centres and certification providers. These institutions make overseas employment easier and safer to access.

Workers from Sindh and especially Balochistan face multiple barriers: fewer licensed agencies, limited access to internationally recognised training, weaker facilitation systems and higher migration costs. Women and marginalised communities encounter even greater obstacles. The ILO recommends that provincial governments integrate international labour mobility into their skills strategies by expanding demand-driven technical training, strengthening Recognition of Prior Learning, improving career guidance and aligning vocational education with shortages in destination countries.

Investment channel scarcity, Mirpur paradox

One of the most common criticisms of remittances is that they fuel consumption rather than productive investment. Plots, houses, weddings and imported consumer goods often become visible symbols of success. These expenditures raise living standards but do not necessarily create sustainable employment.

Nakhoda warns that diverting funds into non-productive luxury consumption can inflate prices and hurt non-recipient households. Trade and retail absorb a significant portion of inflows, while real estate remains a preferred destination for migrant savings. A large share of national savings becomes locked in assets that generate limited economic activity compared with manufacturing or small businesses.

However, the ILO cautions against labelling household spending as "unproductive." Food, healthcare, education and housing improve welfare and strengthen human capital. The policy challenge is to create conditions in which investing in businesses becomes attractive. International experience shows that migrant families are more willing to invest when governments provide financial literacy programmes, entrepreneurship support, business mentoring and access to affordable credit. Countries such as the Philippines, Sri Lanka and Nepal have combined savings products, reintegration assistance and enterprise development for returning migrants. Pakistan has yet to build a comparable ecosystem.

Banks largely function as channels for receiving and withdrawing remittances. Few products are tailored for migrant workers. Venture capital for small enterprises remains scarce. Many workers therefore choose the certainty of land or a house over the risk of a business venture. Few places illustrate the dilemma better than Mirpur in AJK. For decades, thousands of families have benefited from migration to the UK. Household incomes have risen, and housing developments have proliferated. Yet the district has not emerged as a major manufacturing centre. Economists point to policy uncertainty, inadequate industrial infrastructure, weak investment opportunities and exchange-rate concerns.

Winners, losers and localised Dutch Disease

Remittances reduce poverty for recipient households. They can also widen inequality within communities. As foreign income raises purchasing power, land prices, rents and the cost of many services often increase. Families without migrants must compete in the same markets on purely domestic incomes.

Nakhoda describes the phenomenon as a localised version of Dutch Disease, in which large foreign-exchange inflows inflate asset prices and erode purchasing power. Dr Mumtaz notes that while average incomes rise in remittance-heavy districts, income disparities can widen. A distinct "migrant elite" emerges.

Women left behind

Migration changes households in ways statistics cannot fully capture. For many women, the departure of husbands turns them into de facto heads of household. They manage finances, children's education, healthcare and agricultural responsibilities.

Increased responsibility, however, does not automatically mean greater empowerment.

Evidence suggests women's financial autonomy improves when remittances are accompanied by financial literacy, digital banking and entrepreneurship training.

Migration as strategy, not escape

Migration has become a permanent feature of the global economy. Countries with ageing populations need workers. Pakistan continues to produce a rapidly growing labour force that the domestic economy struggles to absorb.

Former State Bank governor Dr Ishrat Hussain argues that Pakistan should count remittances under the head of exports and treat migration as part of a broader labour-market strategy.

"Our policy response should focus on negotiating country-specific labour agreements and aligning training programmes with overseas demand," he says. That requires investment in technical, vocational and language skills, along with internationally recognised certifications.

Empirical evidence suggests migration can encourage skill development rather than simply creating brain drain. Remittances contribute to poverty reduction, household resilience, better education and health outcomes, and a stable source of foreign exchange.

The costs are real. Pakistani workers often encounter discrimination and exploitation abroad. They fill labour shortages yet frequently remain temporary workers with limited rights.

Lessons from the Philippines

Pakistan is among the world's largest exporters of labour, yet its migration system remains fragmented. The Philippines transformed overseas employment into a deliberate national strategy backed by specialised institutions, skills programmes and bilateral labour agreements.

Despite having more than twice the population of the Philippines, Pakistan generates broadly comparable remittance inflows. The difference lies in the quality of preparation and institutional support. The Philippine experience also carries a cautionary note. Remittances improved living standards, but they did not turn the country into an industrial powerhouse. Migration alone cannot replace domestic economic development.

The return journey

Immigrants live a divided existence, torn between two worlds. Even while at work, they call home to check on family dynamics. All their deepest emotions remain tied to the people they left behind. They view their new surroundings as merely a transitional space.

So, equally important is the return journey. Most Pakistani workers in the Gulf eventually come home. Reintegration must become an integral part of migration policy. Returning workers need recognition of skills acquired overseas, career counselling and entrepreneurship support.

The ILO recommends shifting Pakistan towards internationally recognised, digitally verifiable and skills-based migration. Proposals include aligning technical and vocational education with international standards and introducing a digital National Skills Passport.

Liaquat still hopes to return soon. Like millions of Pakistanis working overseas, he left paradise not because he wanted to, but because he believed it was the only way to build a better future. That is the greatest paradox of Pakistan's remittance economy. The country celebrates record inflows every year, yet each new milestone also represents hundreds of thousands of lives spent away from home. The challenge is to ensure that migration remains a bridge to development rather than a permanent substitute for it.

Recently, the Ministry for Overseas Pakistanis and Human Resource Development launched the National Emigration and Welfare Policy 2026 as a national commitment to over 11 million overseas Pakistanis. The policy seeks to position Pakistan as a preferred source of quality human resource through five pillars: safe emigration and skills development; worker protection; formal remittances; diaspora engagement; and returnee reintegration.

Only time will tell whether this policy will succeed. Meanwhile, Liaquat is preparing to return to his hometown of Rawlakot.