Pakistan’s economy is passing through a stabilisation phase; however, the conflict in the Middle East threatens two of the country’s most important pressure valves: overseas employment and workers’ remittances. For many decades, the Middle East has been Pakistan’s key economic support system by providing employment to millions of Pakistani workers.
Each year, around 0.6-0.7 million Pakistani workers head to Gulf countries for jobs, helping to relieve local job markets and sending back significant remittances. Rising geopolitical tensions in the region bring up a troubling question: what will happen to Pakistan’s economy if this external support diminishes?
A recent publication by the Pakistan Institute of Development Economics has quantified the potential adverse impacts of the Middle East crises on overseas employment and workers’ remittances. The findings reveal that a prolonged war could trigger large-scale return migration, tightening the squeeze on jobs at home while draining remittances.
Migration records indicate that from 2011 to 2025, Pakistan sent over 9m workers to the Middle East, primarily to Saudi Arabia and the United Arab Emirates. About 54 per cent of the total country’s remittances originated from the Middle East in 2025. These funds support spending on everyday needs, schooling, medical care, and homes. Remittances, at a broader level, have helped ease pressure on Pakistan’s trade deficit and foreign exchange reserves.
It is likely that around half a million people may not go abroad this year and another half a million may return home, impacting around $1–4bn in remittances
The export of labour to the Middle East is a great relief for the domestic labour market, as the labour force in Pakistan is growing quickly. Every year, almost 2m young people join the workforce, but the economy has had a hard time creating enough jobs for them. In these situations, working abroad, especially in the Gulf, has been crucial to stability. During 2010-24, Pakistan has successfully placed more than 1m workers in the Middle East market, which is nearly one-third of the total new entrants (25.9m) into the labour market.
The impact on Pakistan could be considerable. If migration from abroad slows down, even for a short time, many workers who would typically go overseas might have to return, and thousands could be unable to go abroad.
Even small disruptions can lead to significant pressure. Pakistan’s labour force has increased from 57m in 2010 to over 83m in 2024, showing the country’s quickly growing working-age population. If there were no opportunities for overseas jobs, the local economy would need to take in millions more workers each year.
The consequences extend beyond employment alone. A reduction in migration would also affect remittance flows. These funds are crucial for bolstering household earnings and stimulating local economies across many regions of the nation.
Lower remittances may add more pressure on Pakistan’s external balance, especially as the country is already dealing with ongoing trade deficits and frequent foreign exchange shortages.
It is difficult to accurately assess the impact of war on overseas migration and potential return flows. However, some facts are well known. For example, there was zero placement of workers abroad for a few months during the Covid pandemic, and around one million workers did not go abroad in 2020 and 2021 due to the Covid pandemic. If the war is prolonged or the economy of the Middle East faces another recession, it is likely that around half a million people may not go abroad this year, and another half a million may return home. The impact on remittances could be from $1 billion to over $4bn.
The geopolitical instability in the Gulf region poses a considerable risk to this established overseas employment system. Should tensions persist or endure, the ongoing Iran-USA war has shaken the Middle East’s long-standing prestige as a safe wealth hub. Cities such as Dubai and Doha have built their global standing on political stability, robust infrastructure, and a welcoming environment for expatriates. Prolonged conflict could undermine this perception, impacting investment, business activities, and the demand for foreign labour.
These risks show why it’s crucial to plan for the long term. Pakistan should not take for granted that the Gulf labour market will keep taking in workers forever. Changes in global migration trends, automation, national policies in Gulf economies, and geopolitical issues may all impact labour demand in the region.
Pakistan ought to adopt a proactive stance regarding labour migration to effectively manage the prevailing uncertainties. The nation should investigate diverse overseas labour markets. Employment prospects are gradually improving in countries such as Japan, South Korea, Malaysia, and specific regions of Europe, particularly for skilled and semi-skilled labourers. Labour agreements, coupled with targeted skill development initiatives, could facilitate Pakistani workers’ access to these emerging opportunities.
Next, domestic economic policy should focus more on creating jobs and supporting entrepreneurship. Focusing on technical education, vocational training, and small business development can effectively support the increasing youth population and lessen dependence on jobs abroad.
Pakistan needs to enhance its policies for reintegrating returning migrants. Workers, particularly returning from the Middle East, bring useful skills, savings, and experience. With adequate backing, encompassing access to financial resources, vocational training, and entrepreneurial assistance, these individuals can significantly contribute to both the promotion of entrepreneurship and the stimulation of local economic expansion.
The Gulf states have historically bolstered Pakistan’s economy by absorbing surplus labour and generating remittance inflows. Conversely, an excessive dependence on a single geographic area exposes inherent weaknesses. Given the rising geopolitical instability, Pakistan must anticipate a future in which international employment prospects may be less secure. Therefore, a multifaceted approach emphasising labour market diversification, skill development, and the generation of domestic employment is crucial for maintaining economic stability and ensuring that Pakistan’s expanding workforce functions as a benefit rather than a liability.
The writer is Dean of Research at the Pakistan Institute of Development Economics (PIDE). He can be reached at Email: shujaat@pide.org.pk
Published in Dawn, The Business and Finance Weekly, March 30th, 2026
