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Afaqlens: Geopolitics & World Affairs
Economy

Gulf Workers and Pakistan's Economy: Why Remittances Matter

Pakistan received a record $41.6 billion in remittances in FY26. Here is how Gulf workers support the economy, and the risks of relying on them.

By Hamid Jawad · 27 October 2026
Gulf Workers and Pakistan's Economy: Why Remittances Matter

Representative image: construction workers. Photo: [wal_172619] / Pixabay

Pakistan received a record $41.6 billion in remittances in the 2025-26 financial year (July 2025 to June 2026). That is more than the country earned from its total exports. Most of this money comes from overseas Pakistanis working in the Gulf. Saudi Arabia sent about $9.78 billion and the UAE about $8.81 billion.

Behind these numbers are real people. A construction worker in Riyadh or a delivery rider in Dubai sends part of his pay home every month. That money pays for food, school fees and medicine in a village in Punjab or Sindh. This article looks at where the money comes from, what it does for the Pakistan economy, and what could go wrong.

Who are the Pakistani workers in the Gulf?

Labour migration from Pakistan is not new. According to the Bureau of Emigration, about 15 million Pakistanis have gone abroad for work since 1971. Saudi Arabia took more than 7.8 million of them. The UAE took about 4.5 million. Fewer than 5% went outside the Gulf.

The trend continues today. Reports say more than 760,000 Pakistanis left for work in 2025, and about 70% of them went to Saudi Arabia.

Most of these workers are not professionals. In 2024, about 364,000 went as labourers and 185,000 as drivers. Only around 8,000 were engineers and 3,600 were doctors.

How remittances support the economy

Pakistan buys much more from the world than it sells. In FY25, imports were above $70 billion, while exports of goods and services were about $40.7 billion. The trade deficit was close to $29 billion.

Remittances covered that gap. According to Dawn, they were about 130% of the trade deficit, and the ratio has stayed above 100% for five years. Dawn’s Nasir Jamal calls remittances a kind of “quasi-export”. The product is not made in a factory. It is human labour.

The effect is clear in the current account. In May 2026, remittances hit a monthly record of $4.25 billion, helped by Eid. The current account moved into a $459 million surplus that month. Even in July-May, when the trade gap reached about $35 billion, the current account still showed a $255 million surplus.

Remittances also support foreign exchange reserves and keep the exchange rate steadier.

Why did remittances grow so fast?

JS Global’s Waqas Ghani says the monthly average rose from $3.2 billion to $3.5 billion in FY26. He points to three reasons: more people going abroad, a shift from hawala to banks, and a stable exchange rate.

An Express Tribune editorial agrees that part of the growth comes from the crackdown on hawala. Money that once moved through informal channels is now entering the banking system.

Savings, schools and small businesses

Former State Bank governor Ishrat Husain makes a strong point about savings. In FY25, Pakistan’s gross national savings were 14.1% of GDP. Gross domestic savings were only 6.3%. The gap came from money sent by overseas Pakistanis. In his view, a large part of domestic investment was financed by their savings.

He also says districts such as Jhelum, Chakwal and Rawalpindi, which have many overseas workers, do better on literacy, school enrolment and poverty reduction. Families spend on education, health, home repairs and property. Some returning workers use their savings and skills to start small businesses.

The risks: Dutch disease and brain drain

The story has a second side. The Express Tribune editorial warns that much of the money goes to daily spending, not investment. It also warns that Pakistan’s biggest export may become its own workforce.

Some economists link this to Dutch disease. When a lot of foreign currency comes in, the local currency gets stronger and exports become more expensive. Ishrat Husain disagrees. He says Dutch disease comes from free gains on natural resources, not from income earned through hard work. He adds that in FY25, the exchange rate stayed stable and reserves rose despite huge remittances.

Brain drain is another debate. Husain says about 2 million people enter the labour force every year, and roughly half of them go abroad. But among 832,000 migrants, only 2.6% were highly qualified and 5.3% highly skilled. Most people who leave are those who could not find work at home.

There is also a worrying number. Foreign direct investment fell 28.4% in July-May FY26. Dollars are coming in because of labour, not because of investment.

How safe is this system?

According to Dawn, about 55% of remittances come from the GCC countries. Their economies depend on oil prices and regional stability.

The US-Iran war in 2026 made this risk real. In March, estimates linked to the Pakistan Institute of Development Economics suggested that no new workers might go to the Gulf this year, that up to half a million could return, and that remittances could lose $3 to 4 billion a year. Oil also became costly. By the end of April, Pakistan’s weekly oil import bill had risen from about $300 million to about $800 million, a 167% jump.

So far, these fears have not come true. FY26 ended at a record. Remittances in July 2026 were $3.63 billion, up 13% from a year earlier. Still, the Asian Development Bank warns that a longer war could hurt Gulf labour markets and reduce remittances.

The human cost

This income also has a human cost. AFP reported that Muzaffar Ali, a worker from Jamshoro in Sindh, died in Dubai during the war. His family says they have received no financial help from the UAE or Pakistan.

The rights group Equidem alleged in June 2026 that the UAE detained and deported thousands of workers in May, mostly from religious minorities, without clear reasons or due process. Equidem says deported workers also lose unpaid wages and the chance of justice. These are Equidem’s allegations. We could not find the UAE’s response.

What can Pakistan do?

Experts suggest three steps.

  1. Use formal channels. Dawn reports that money equal to 20% to 50% of formal inflows still moves through hawala and hundi, because it is faster and cheaper. The Roshan Digital Account has attracted more than 900,000 accounts and over $12 billion. In March 2026, RDA 2.0 opened it to foreign investors so that more money goes into investment, not only spending.
  2. Build skills. Ishrat Husain suggests labour agreements with each destination country, plus technical and language training that matches foreign demand.
  3. Grow local industry. The Express Tribune says manufacturing and IT should grow so that workers are not the country’s main export.

My take

In my view, if relations between Pakistan and Saudi Arabia or the UAE ever got worse, the effect on Pakistani workers there would be serious. It is hard to measure how big the danger could be. First, remittances would slow down or stop, and that would badly hurt the Pakistan economy. If workers were also sent home, hundreds of thousands of people would lose their jobs at once. Pakistan would find it very hard to support them. It could become one of the worst crises in the country’s history and shake the foundations of the economy.

Right now, I do not see signs of this happening. But I also do not see the government preparing for this risk, or showing much interest in doing so. A risk that is not visible today can still be very costly tomorrow.

At the least, Pakistan should diversify where its workers go and train them for other markets.

Conclusion

Remittances of $41.6 billion are more than a statistic. They show how much Pakistan’s economy depends on workers who live far from home. The country should thank them, but also give them better jobs at home so that people do not have to leave to support their families.

Sources