Impact of Oil Price on Remittances from GCC to Pakistan

Abstract

Remittances are one of the most important sources of foreign exchange reserves. The Pakistani workers employed in the Gulf region's oil exporting countries remit more than 60 percent of the total remittances. Income of Gulf region's oil exporting countries depends on the revenue obtained by exporting oil. Therefore, any change in price affect the oil revenue of these countries which in turn affect government spending, projects and thereby demand for labor. This ultimately influences remittances from these countries. This study examines the influence of oil prices on remittances from Gulf Cooperation Council to Pakistan using data from 1981 to2018. The study explores oil prices positively influence remittances. Similarly, remittances are observed to be pro-cyclical to economic condition in the home country. Among other variables, host country economic condition, numbers of migrants, difference in the inflation between home and host countries have positive impacts on the remittances inflows to Pakistan. Exchange rate depreciation, on the other hand, has negative impact on the remittances.