Impact of remittances on economic growth

Introduction

Remittances are the sum of money that international migrants send to members of their families
back home. It differs from other forms of foreign capital influx such as loans, aid and foreign
direct investment. For developing nations, it is the main source of foreign exchange gains.
Remittances are now a significant and reliable source of external funding and capital
accumulation in developing countries. Remittances are a significant source of income for
households in developing nations and are seen as a reliable source (Ahmad, 2013). Remittances
from South Asian migrant workers, which are a vital source of economic growth, are transferred
in large amounts each year. Remittances are used to increase national savings, ease the pressure
on the balance of payments and foreign exchange, and support development spending. To
increase the inflow of remittances, the remittances should be transferred through official
channels including bank draughts, money transfer businesses, and others. Avoid using unofficial
channels like traders, friends, or relatives who lack legal standing (Sutradhar, 2020).

Remittances sent home by migrant workers are regarded as Pakistan's most important source of
foreign currency and economic growth since the early 1970s. According to an international
statistic based on world band statistics from 2018, Pakistan is ranked eighth in terms of receiving
personal remittances. Remittances are therefore very important to Pakistan. Remittances are
consistently regarded as a convenient source of foreign money that can help Pakistan close its
structural current account deficit. Pakistan has accumulated a sizable quantity of foreign debt that
needs to be paid back on a regular basis. Remittances are a major source of foreign currency
needed to finance reserves and debt service. Pakistan, like other emerging nations, mainly
depends on foreign financial inflows to finance its domestic investment (Munawar, 2019).
Remittances have a significant impact on economic growth by lowering the current account
deficit, enhancing the balance of payment, and reducing reliance on external borrowing.
Remittance inflows support economic growth and combat poverty by boosting recipient nations'
income, easing credit restrictions, speeding investment, and advancing human development by
funding improved healthcare and education (Zafar Iqbal, 2005)

Worker remittances are crucial for starting new businesses, providing small amounts of funds for
investments, and enabling individuals to develop their skills, but they are also vital for the nation
since they help to provide the capital necessary to encourage economic growth. Remittances
could help with issues including credit market failures, income and opportunity inequality,
income volatility, and poverty that affect emerging nations. Remittances at the household level
assist in resolving these issues by supplying the funds required to start a business, buy a home, or
cover medical or educational costs, all of which are typically out of the reach of large portions of
the population in the recipient nations. Remittances have favorable macroeconomic externalities
that are likely to be significant and provide a steady source of foreign cash that can assist avoid
balance of payment crises (Giuliano, 2009).

Foreign remittance is an important source of foreign exchange earnings for Pakistan since 1970.
During the past four-decade Pakistan received significant amount of remittances, however,
fluctuation were also observed in the inflow of remittances. Inflow of remittances affects
economic growth positively by reducing current account deficit, improving the balance of
payment position, and reducing dependence on external borrowing (Iqbal and Sttar, 2005).
However, Chami et al (2003) find that remittances have negative impacts on economic growth of
recipient country because a significant flow of remittances reduces labor force participation and
work efforts which lowers output. Thus, the impact of remittances on economic growth and
development of recipient country has been controversial. Remittances have positive effects on
economy of Pakistan in terms of aggregate consumption, investment, reduction in current
account deficit, external debt burden and improve education/skills of the households.
Furthermore, labour migration is considered to be a useful source of foreign exchange earnings
(Naseem, 2004). Siddidui and Kemal (2006) explored the impact of decline in remittances on
welfare and poverty in Pakistan.

Since the 9/11 attacks, remittances to Pakistan have surged significantly, rising from US$1075
million in 2000 to US$ 6000 million in 2007. This enormous influx of remittances helps to
reduce poverty by boosting foreign exchange reserves, lowering the current account deficit, and
stabilizing the exchange rate.

Remittances sent home by Pakistani citizens working abroad increased by 6.1% in fiscal year
(Jul-Jun) 2021–2022 to $31.2 billion, compared to inflows of $29.45 billion during the same
period the year before. Remittances grew 1.7 percent year over year, from $2.71 billion in June
2021 to $2.76 billion in the same period of the fiscal year 2021–22. Remittance inflows grew by
18.4% month over month as compared to the inflows of $2.3 billion recorded in May 2022.

According to data released by State Bank of Pakistan (SBP) on Monday, remittances’ inflows
during June 2022 were mainly sourced from Saudi Arabia at $666.4 million, United Arab
Emirates at $494.7 million, United Kingdom at $454.9 million and the United States of America
$284.7 million. During the corresponding month, the overseas Pakistanis living in Bahrain sent
$45.9 million, from Kuwait $85.3 million, from Qatar $93.6 million whereas $98.5 million were
sent from Oman. Similar amounts were received from Germany, France, the Netherlands, Spain,
Italy, Greece, Sweden, Denmark, and Ireland: $42.5 million, $40.0 million, $5.3 million, $45.7
million, $75.6 million, $30.9 million, $7.0 million, $6.0 million, and $11.9 million, respectively.
Similar amounts were sent by the worker from Malaysia, Belgium, Norway, Switzerland,
Australia, Canada, and Japan, who sent out $12 million, $19.5 million, $11.1 million, $3.4
million, $57.6 million, $58.4 million, and $7.6 million, respectively.

Based on its prevalence and global economic significance, remittances are a recent phenomenon
in finance and among the most significant sources of income. According to data from the World
Bank (2014), remittances were $430 billion globally in 2011 and made up 0.31% of the world's
GDP in 2009. While developing nations get $307.1 billion, or nearly 74 percent, of the total
N416 billion in inward remittances, their economic systems are more severely impacted by
remittances. Moreover, 27 percent of the GDP of developing nations comes from remittances.
Remittances are currently the second-largest source of external financial flows to poor nations
after foreign direct investment, according to the World Bank, which estimates that they totaled
USD 414 billion in 2013 (up 6.3 percent over 2012). The earnings earned and transferred by
migrants are predicted to reach USD 540 billion by 2016 given the 232 million international
migrants and the nearly 70 million internal migrants. Potentially becoming a significant source of
foreign financial flows, particularly in developing nations, remittances are growing in
importance and importance in terms of amount and growth rate (Dietmar Meyer, 2017).

Remittances sent home by workers are more significant than other foreign inflows and have a
greater impact on economic growth because of their stability in nature. Vogiazides (2008) (2008)
Remittances from workers have an impact on the economies of developing countries, but they
are not a strategy for sustainable development because they are primarily used for consumption
rather than saving and investment. As a result, governments should break the cycle of
dependence on remittances for growth and development. Remittances from employees can be
used effectively to promote economic growth, according to Jawaid and Raza (2012).  Aleem and
Waheed (2008) Remittances from workers and cash inflows are only beneficial in the short term
for long-term economic growth Countries should increase exports rather than rely on remittances
from workers.

Pakistan, like other developing nations worldwide, is well-known for its high levels of migration
and worker remittances. It is argued that this high migration is the result of poor economic
conditions of the country because the economy is facing so many problems like unemployment,
illiteracy, poverty, inflation, and terrorism etc. Pakistanis are migrating to other countries in seek
of jobs and to improve their standard of living. Additionally, it is argued that the high rate of
unemployment is causing people to go abroad in search of work and a way to support their
families, which is contributing to the brain drain issue. World Bank (2011) With 4.7 million
emigrants, Pakistan is the seventh-highest emigration country and the eleventh-highest recipient
of remittances, getting 9.4 billion US dollars. Pakistan Economic Survey (2011–2012) for years,
remittances from workers have been significant sources of foreign money. These remittances not
only support the balance of payments but also contribute in various ways to the eradication of
poverty and economic growth (Dilshad, 2013).

Remittances have a significant impact on economic development globally, as evidenced by their

effects on labor supply, education, poverty reduction, and economic growth. For millions of
recipients, most of whom are living in poverty, remittances are a lifeline. It may result in the
reduction of poverty in the nations where emigrants are from. Each migrant sends home an
amount of $200 or $300, which accounts for roughly 60% of the family's income. The receiver
spends around 10% of the remittances on schooling and 15% on investments, respectively.
Remittances are regarded as a significant source of funding in both developed and developing
nations. According to the recent data from Migration Development Brief in 2017, worldwide the
flows of
remittance was estimated to be $575 billion, with about $429 billion flowing to developing.
countries in 2016. Remittances to developing nations are much larger than their foreign direct
investment. It reached three times the official development assistance (ODA) (Stanley &
Buckley, 2016). Graph 1.5 demonstrates that the top 10 nations with the highest remittances as a
percentage of GDP are all emerging nations. The country with the most reliance on remittances,
the Kyrgyz Republic, receives 34.5% of its GDP from them, while Honduras has the lowest
reliance, at 18.4% (Zakaria Lacheheb, 2019).

Remittances (1976-2021)
12

10

0
76 978 980 982 984 986 988 990 992 994 996 998 000 002 004 006 008 010 012 014 016 018 020
19 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2

Source: Created by Author based on World Bank

As shown in the graph, remittances in year 1983 were highest because remittances have recently
emerged as a significant source of foreign exchange revenues for Pakistan, particularly from the
Middle East (ME). Since the total quantity of these remittances has increased significantly over
the past several years, they were sure to have a considerable effect on the Pakistani economy by
strengthening its position in the balance of payments and lowering its reliance on foreign
financing. For instance, in 1982–1983, Pakistan received 2.4 billion US dollars in remittances
from the Middle East through official channels, which represented 70% of all exports of products
and non–factor services. But the number of remittances coming in has decreased due to the
recent drop in oil prices and the stalling of Middle Eastern economic activity. The primary
concern right now is how the economy will respond to the decreased influx of remittances and
what the number of remittances will be in the next years.

We offer statistics for Pakistan from 1976 through 2021 for that indicator. With a minimum of
1.31 percent in 2000 and a top of 10.25 percent in 1983, Pakistan's average rate over that time
was 5.32 percent. The most recent value is 8.99 percent from 2021.

Remittances (1976-2021)
12

10

0
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20

Source: Created by Author based on World Bank

 Per Capita GDP
1600

1400

1200

1000

800

600

400

200

0
76 78 80 982 984 986 988 990 992 994 996 998 000 002 004 006 008 010 012 014 016 018 020
19 19 19 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2

Source: Created by Author based on World Bank

In 1976, Pakistan's GDP was recorded at $19.7 billion, with a growth rate of 6.5%. In the 1980s,
Pakistan's economy saw significant growth, with the GDP growing at an average rate of 6.5%
per year. However, the growth was accompanied by high inflation and a large external debt
burden. The 1990s were marked by political instability and economic turmoil in Pakistan. As a
result, the country's GDP growth slowed down, with the average annual growth rate hovering
around 4%. In the early 2000s, Pakistan's GDP growth picked up again, with the country
recording an average annual growth rate of 5.3% between 2002 and 2007. However, in the late
2000s, Pakistan's economy was hit by a global recession, which led to a significant slowdown in
GDP growth. The country's GDP growth rate dropped to 1.7% in 2009. In recent years,
Pakistan's economy has been recovering, with the GDP growth rate averaging around 4% per
year between 2010 and 2019. However, the COVID-19 pandemic in 2020 had a significant
impact on Pakistan's economy, with the country's GDP contracting by 0.5%. In 2021, Pakistan's
GDP is projected to grow by 3.9%, driven by a rebound in manufacturing and services sectors.
 Per Capita GDP
1600

1400

1200

1000

800

600

400

200

0
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20

Source: Created by Author based on World Bank

Literature review

In this section we will discuss briefly the previous work related to our study. Since international
remittances are a worldwide issue and there have been discussions on how they relate to national
economic growth like, Junaid Ahmed (2011) finds that remittances, exports, and the availability
of money all have an impact on economic growth in Pakistan. He employs time series data from
1976 to 2009. While Muhammad Javid (2012) provides evidence of the significance of
remittances for the country's economic advancement, the author finds a positive and considerable
impact of remittances on Pakistan's economic growth in the short and long terms. His research is
centered on efforts to reduce poverty at the district level. It has been discovered that foreigners
are helping three provinces' efforts to reduce poverty (Punjab, Sindh, and Baluchistan). In the
long run, he continues, remittance inflow contributes significantly to poverty reduction and the
progress of the nation. According to Tehseen Jawaid (2012), remittances from abroad are crucial
for Pakistan's economy to flourish. His analysis relies on data from 113 nations over the years
2003–2009. His findings point to a strong and positive correlation between the economic
development of these nations and international remittances. According to his research, low- and
middle-income nations are rapidly catching up to high-income nations. Remittances are another
topic covered by Yaseer Abdih (2012) in his study. For the country's economic development,
Pablo Acosta (2007) examines the significance of remittances. In 11 nations in Latin America,
the author identifies the effects of remittances on poverty, health, and education. According to
his research, remittances are crucial to reducing poverty.

Giuliano (2008) finds that remittances increase growth in nations with less developed financial
systems because they offer an alternate method of financing investment and ease liquidity
restrictions. By easing resource restrictions, worker remittances also significantly contribute to
the development of human capital in the recipient nation. Remittances have been shown to boost
student attendance and reduce the amount of child labour, according to Calero's (2008) research.
The study also reveals that remittances are utilized to pay for education when households are
experiencing aggregate shocks because they are linked to increased employment activities.
Another crucial factor in lowering the severity of inequality and poverty is international
remittances. The household survey base estimates for 10 Latin American nations, which were
provided by Acosta et al. in 2007, confirmed that remittances have adverse, if little, effects on
reducing inequality and poverty.

Vikram (2005) looks at the various ways that remittances can impact economic activity. The
short-term stabilizing effect on consumption is not clearly supported by the study, while the
long-term economic impact of such movements appears to be unclear. Remittances have been
shown by Catrinescu et al. (2006) to have a marginally positive effect on macroeconomic growth
over the long run. The study also supports the notion that the development impact of remittances
is enhanced by the establishment of reliable macroeconomic institutions and policies.
Remittances, according to Fayissa and Nsiah (2008), provide an alternate method of financing
investment and aid in overcoming liquidity issues in nations with weak financial systems, which
promotes economic growth.

Workers' remittances have become the third-most significant source of capital for economic
growth in Pakistan, according to Iqbal and Sattar's 2005 study, which demonstrates a positive
correlation between real GDP growth and worker remittances from 1972–1973 to 2002–2003.
Adams and Page (2005) found that remittances considerably lower the degree, depth, and
severity of poverty in developing countries after analyzing data from 71 developing nations.
According to Lucas (2005), remittances most likely made a significant contribution to Pakistan's
efforts to reduce poverty.

Irfan (2011) did an empirical study on the connections between remittances and poverty in
Pakistan and concluded that GDP is the key element with remittances that contributes to poverty
reduction and economic development. To investigate the relationship between remittances and
economic growth, Jawaid and Raza (2012) looked at data from 113 nations over a seven-year
period. They found through empirical analysis that there is a significant direct connection
between worker remittances and economic growth. Additionally, it was shown that remittances
from employees in high-income nations contribute more. Workers' remittances and economic
growth have a considerable positive link in the short term, but a negative impact in the long run,
according to Waheed and Aleem's (2008) empirical analysis of time series data from 1981 to
2006 of Pakistan's economy. Giuliano and Ruiz-Arranz (2005) conducted an IMF study on the
impact of remittance on growth and discovered no correlation between remittances and growth
after analyzing data from 101 developing nations.

There is a relatively large debate regarding the impact of remittances in the home country of
migrant workers, though most of the studies have looked at the correlation between remittances
and growth but have not established any causation. According to numerous research, remittances
promote growth by easing the investment constraint as they act as a substitute for inefficient or
non-existent credit markets (Giuliano and Ruiz-Arranz, 2005). If remittances are used to pay for
children's education and other welfare costs like health care, they may also have a significant
effect on economic growth because in the long run, they may have a positive effect on labor
productivity and hence output. Also, according to Glytos (2005), remittances may allow the
import of more capital goods, which may help in boosting the growth rate.

Yet, Stahl and Arnold (1986) observed that if there is a demonstrative effect, remittances may
have a negative impact on GDP. The remittance recipients may be encouraged to buy imported
goods by this demonstration impact. As a result, if this effect spreads widely, it may reduce
savings and investments to the point where it may be enough to slow the recipient country's rate
of growth. It would be detrimental to development if remittances were used for conspicuous
consumption or inefficiently by an excessive level of capital intensity in the agricultural sector
(Oberoi and Singh, 1980). Similarly, there may be a moral hazard issue between senders and
recipients if recipients become heavily dependent on the easy money, which makes them less
likely to participate in the labor market. That is, remittances have a negative impact on economic
growth (Barajas et al. 2009, and Chami, Fullenkamp and Jahjah, 2003).

Several studies that cover many different countries are based on panel data.  Chami et al. (2003)
finds that remittances have negative effects on growth in their study of 113 countries. On the
other hand, Pradhan, Upadhyay, and Upadhyaya (2008) found a significant impact on growth in
their work with 39 developing countries between 1980 and 2004. Ziesemer (2006) argues that
remittances raise savings, which raises investment by lowering interest rates and raise the
literacy rate. Jongwanich (2007), finds that remittances have a positive but marginal impact on
economic growth in Asian and Pacific countries. Remittances have no effect on economic
growth, according to Barajas et al. (2009). Whether remittances have a positive or adverse effect
on long-term growth has not yet been determined, claim Catrinescua et al. (2009).

Irfan (2011) investigated how Pakistani poverty is affected by remittances. For this study, two
different types of data were used. The first was survey data (HIES) for Pakistan from 1996–1997
and 2006–2007. Second, from 1975 to 2009, Pakistani time series data were used. To investigate
how remittances affect poverty, the author uses OLS methodology. The study discovered that
remittances are likely to reduce poverty in Pakistan.

Khalid et al (2011) investigate the connection between remittances and financial institutions and
GDP growth. They used Pakistan's annual data from 1973 to 2010 for this analysis. The Bond
Test mythology was chosen for this study. Bond test is the modified version of the ARDL model.
According to the study's findings, remittances are procyclical in nature and rise when the
recipient country is progressing and fall when it has a downturn (counter cyclical). The study
further investigated that development in the financial sector can be factor to boost in remittances
in home economy.

Karagoz (2009) examines remittances and economic growth for Turkey. For this analysis,
Karagoz used annual data for Turkey from 1970 to 2005 and used two techniques   OLS
Parameter and cointegration. The study resulted that remittances inflow to Turkey is significant
but negative link with economic growth. The study also revealed that the third generation of
Turkey living in Western Europe are not willing to send money home since they have developed
great entrepreneurial abilities. As a result, it will be very difficult for Turkey to receive as many
remittances as in the past.

The factors influencing worker remittances to Pakistan were investigated by Shahbaz and Amir
(2009). From 1971 through 2006, this study was conducted. ADF procedure is used for variables
whether they are stationary or not, after this they adopted ARDL methodology approach for
cointegration. The study's findings indicated that the primary driver of remittances into Pakistan
is altruistic motivation. A decline also looked at how price changes, world economic
situation and a decline in home country exchange rates are factors that contribute to an increase
in remittances. It also looked at how higher education levels and a rise in global interest rates
contribute to a decline in remittance inflow to Pakistan.

Qayum et al. (2008), examined the impacts of remittances on poverty and economic growth.
They used the annual data of Pakistan from1973 and 2007. This study uses the ARDL
methodology to examine the relationship between remittances and poverty and economic growth.
This study also resulted as others, remittances have a positive and significant relationship with
economic growth and remittances are also accountable for reducing poverty in Pakistan.

According to Mansoor and Quillin (2006), developing countries are the primary recipients of
remittances. As a result, developing nations are in the process of replacing their current
infrastructure with a more advanced setup, demography, and secure government organization
system. According to Mughal and Makhlouf (2013), Adams and Page (2005), and Jongwanch
(2007), remittances contribute to the growth of the economy of developing countries. The
findings showed that foreign remittances have a negative effect on the labor force in the recipient
country. Khawaja and Hiranya (2010) examined how remittances affected economic growth. The
results of the analysis demonstrated that remittances have a positive and significant impact on
per capita growth as well as economic growth. Anyanwu and Erhijakpor (2010) classified the
impact of remittance inflow into national, community and household level perspectives. The
examined results indicated that remittances help to reduce poverty through household income
and consumption. The impact of remittances on economic growth was studied by Ratha (2003)
and Imai et al. (2014). The studied results showed that remittance inflow increases saving and
investment. Remittances, according to the authors, are likely used to purchase items made
domestically and have a significant impact on economic growth. The impact of remittances on
the economic growth of developing countries was studied by Rodrick et al. in 2008. Remittance
inflow has a positive and insignificant impact on the economic growth of developing countries,
according to the conclusions of the analysis. Siddiqui and Kamal (2006) investigated the role of
decline in remittance inflow with trade liberalization shocks on the poverty and welfare in
Pakistan. The examined results indicated that a decrease in remittance inflow to Pakistan led to
an increase in poverty levels.

Country-specific studies of Pakistan are relatively rare, although the subject has received more
attention recently. Interestingly, the relevant literature covering Pakistan is more consistent in its
findings, indicating that remittances have a positive effect on economic growth in the long run.
For example, Qayyum et al. (2008) examined the impact of remittances on poverty and economic
growth from 1976 to 2006. Remittances have a significant and positive impact on economic
growth, according to their analysis. Furthermore, remittances can result in sustainable growth
and an improvement in the welfare of poor households as their effects become more widespread
over time. Similarly, Kumar (2011) concluded that remittances and economic growth are
positively related in the long run while in the short run remittances are insignificant contributor
towards such growth. Jibran et al. (2016) investigated the effect of remittances on per capita
growth in Pakistan. Their research shows that remittances have a significant and positive impact
on per capita growth, and that this impact is shown throughout the long term as well as in the
short term. Despite this agreement, it is still unclear how much remittance inflows will affect per
capita income.

Using data from 1970 to 2008, Cooray (2012) investigated the impact of remittances on the
economic health of south Asia. Remittances had a significant positive impact on economic
growth. He concluded that the development of the financial sector can reveal the positive
connection between remittances and economic growth. Using the Johansen Co-integration
technique, Marwan et al. (2013) examined the effects of Overseas Development Aid (ODA) and
remittances on economic growth in Sudan from 1977 to 2010.They concluded that remittances
had a positive effect on Sudan's economic growth. The long-held theory among economists that
remittances tend to boost an economy's long-term growth and development was put to the test by
Hassan (2011). They investigated how remittances affected the growth of the recipient nation but
came to a different result. Remittances typically have a tiny, indirect impact on growth, but there
is no evidence that they have a significant, direct impact. In the case of Pakistan, many studies
have been conducted to examine the impact of remittances on the economy. The impacts of
remittance inflow on poverty and economic growth in Pakistan were examined by Qayyum et al.
in 2008. Using the ARDL approach, they have examined data from 1973 to 2007. Remittances,
according to their analysis, have a long-term positive impact on economic growth and a negative
impact on poverty. Rahman (2009) examined the stated relationship for four countries including
Pakistan. He used the ARDL model to analyze data from 1976 to 2006 and discovered a long-run
and short-run statistically significant positive correlation between remittances and economic
expansion of Pakistan.

By using data from 1976 to 2009, Junaid et al. (2011) investigated the relationships between
financial development, remittances, and exports with economic growth of Pakistan. Their
findings showed that remittances had positive long-term and short-term effects on economic
growth. Using the ARDL model, Al Khathlan (2012) also looked at the relationship between
economic growth and remittances from 1976 to 2010. Additionally, he discovered proof that
remittances have both short- and long-term, significant positive effects on Pakistan's economic
growth. Javid et al. (2012) focused on the inflow of remittance and its impact on Pakistan's
economic growth and poverty. The ARDL technique was used to gather and analyze data for the
years 1973 through 2010. Their findings showed that, over the long term, remittances are
negatively associated with poverty and positively associated with economic growth. By using
data for the years 1985 to 2010, Raza et al. (2011) examined the effect of foreign capital inflow
on Pakistan's economic health. They showed evidence of positive and significant remittance
effects on economic growth using the multiple regression technique. Dilshad (2013) examined
the impact of remittances on economic growth using data from 1991 to 2012. He observed
significant and positive effects of remittances on economic growth using a regression model.
Generalized method of moments (GMM) was used by Hussain and Anjum (2014) to analyze data
from 1973–2011 and determine the relationship between worker remittances and GDP growth.
Their research showed that worker remittances contribute significantly to Pakistan's economic
growth and positively affect GDP growth.

Through both direct and indirect channels of money transfers, Amjad (1986) and Burney (1987)
demonstrate how remittances have benefited countries over the past three centuries. The study
shows that approximately 60% of remittances are spent on consumer durables, consumer
purchasing patterns, and special occasions like weddings, the hajj, and birthday parties. The rest
is either saved or put towards commercial, industrial, and agricultural expansion, all of which
indirectly support economic growth. Remittances also contribute to the BOP's improvement, the
national saving rate's elevation, and the reduction of the current account deficit and external debt
burden. According to Datta and Sarkar (2014), remittances have a positive impact on economic
growth. Remittances, according to a study, help to avoid balance of payment (BOP) crises.
However, it may have a negative impact if remittances are exclusively used for consumption and
unnecessary purposes. If this capital infusion is used to fund children's education and health care,
both GDP growth and human capital will benefit.