Foreign remittances have always been a mainstay for the Pakistani economy and have been one of the only consistent inflows of money into the economy since the 1980s. This year, remittances have risen by 13.7 percent to a record $15.83 billion. Saudi Arabia, UAE and the US lead the pack when it comes to remittances.

However there are come caveats. For this money to actually be useful for the people and the economy, the government has to make efforts to control inflation. Remittances need to have purchasing power in Pakistan; else workers abroad just have to send more money. And while we will celebrate the increase, the cause may just be increased needs due to inflation and rises in food and energy prices. Secondly, an economic crisis in the Gulf States can adversely impact our inflows. The 1973 oil crisis impacted South Asia not just with regards to the oil process but also the inflow of remittances. Stability of the oil rich countries in this regard at least is in our interest. War in the region does no good to Pakistan.

The third issue is that the reserve build-up in Pakistan is due to large-scale foreign borrowing, sale of bonds and continuous rise in home remittances. None of these gains are due to government policy. But the government is trying to capitalize on remittances, focusing on promotion of a formal channel for international remittances through banks and money transfer services under its Pakistan Remittances Initiatives (PRI). Lastly, it is also crucial to know that much of the remittances come through illegal channels which are not widely productive for the economy. The transfer of part of or all illegal foreign exchange earnings—from kickbacks, the drug trade, and other sources, does lead to an increase in official remittances. However, the transfer of such illegal earnings, including non-taxed earnings by Pakistanis abroad, might not occur through the official remittance channel for fear of being detected and those making such transfers prefer the use of the unofficial route (also known as hawala or hundi transactions). There is no research into what this really means for the economy, and where these remittances are being further invested; news reports basically just skim over the numbers without understanding the implications.