BUDGET 2026-27: Analysis: Can remittance fairy-tale weather Mideast storm?

THIS graph shows personal remittances as a percentage of Pakistan’s GDP since the late 1970s.—Source: World Bank, SBP data • Ex-finance minister Hafeez Pasha says foreign inflows could encourage disproportionate investment in real-estate• 1970s oil imbroglio marked the beginning of labour emigration to Gulf, while current crisis could spell its end• PIDE sees around a million workers’ livelihoods being affected if conflict prolongs ONLINE listings for properties in Punjab districts like Mandi Bahauddin and Gujrat yield images of Spanish-style villas, fully decked out with opulent fittings and European design flourishes. This stylised approach to construction is quite deliberate and reflects the social status that comes with having a ‘Kamanay Wala’ (earning member) abroad. In many families, at least one offspring is abroad, creating an alternative source of income that, in many cases, has reduced the incentive to further develop the district’s fertile agricultural land for those that still dwell there. Mandi Bahauddin particularly is one of many districts where household prosperity is closely tied to money sent from overseas. Saying that remittances are Pakistan’s lifeline is no exaggeration. Released in May, the State of Pakistan’s Economy Half-Year Report 2025-26 projects remittances at up to $42 billion this fiscal year, compared to exports of $30.5bn. At the macroeconomic level, remittances help keep the current account deficit in check. At the household level, they act as an essential safety net, providing direct cash support to families. However, cash in hand at the household level tends to drive spending rather than investment in productive activities. Pakistan’s reliance on remittances has laid the foundation for a form of ‘Dutch disease’, where the economy depends on inflows that fuel demand rather than production. The State Bank reports also note that remittances increase currency in circulation, as recipients convert inflows into physical cash for day-to-d