The return of nearly 1.5 million Afghan immigrants from Pakistan will have significant implications for the country’s economy. These impacts can be assessed through various lenses, including the socio-economic positioning of Afghan immigrants, their strain on state infrastructure, humanitarian considerations, and population demographics. Pakistan hosts nearly 4 million Afghan immigrants, of whom 1.5 million are undocumented. Their numbers surged after the sudden exit of the U.S. from Afghanistan in August 2021, which led to the Taliban’s return to power and triggered a large-scale refugee crisis. Pakistan bore the brunt of this crisis, taking in the highest number of Afghan refugees. In October 2023, Pakistan announced its decision to expel all undocumented Afghan immigrants, citing economic and security concerns.

Pakistan has been the primary recipient of Afghan refugees since the Soviet invasion of Afghanistan in 1979. A second major influx occurred in 2001 following the U.S.-led War on Terror. According to the UNHCR, over 4 million Afghan refugees were in Pakistan at that time. The third wave came in 2021 after the Taliban’s takeover. This persistent inflow of Afghan refugees has exacerbated Pakistan’s population challenges. Many of these refugees settled in northern Pakistan and urban centers, further straining national resources.

The economic burden of hosting millions of Afghan immigrants has been considerable. Pakistan’s already struggling education and healthcare sectors have faced additional pressure from undocumented individuals who benefit from public services but do not contribute to the tax system. Additionally, Pakistan’s security expenditures have risen sharply due to the need for enhanced border management and law enforcement efforts to address issues linked to unregistered populations.

A large number of Afghan immigrants operate in Pakistan’s informal economy, running unregistered businesses and avoiding taxes. This results in significant revenue losses for the government and undermines efforts to formalize the economy. Moreover, their presence in low-skilled job markets has intensified job competition, driving down wages and limiting employment opportunities for local workers. Facilitating their return would ease pressure on public services, allow better resource allocation, and create more sustainable employment prospects for Pakistani citizens.

The return of Afghan immigrants provides an opportunity to streamline Pakistan’s economic structure by reducing informal, undocumented transactions. Many Afghan-run businesses operate outside the formal taxation framework. Their departure will help curb tax evasion, encourage tax compliance, and increase government revenue. With fewer undocumented workers in the labor force, businesses will be compelled to adhere more strictly to labor laws, ensuring proper documentation and wage regulations. This shift will foster a more structured economic environment, strengthening institutional oversight and enhancing tax collection mechanisms.

Job market conditions will also improve as the departure of Afghan immigrants alleviates competition in the low-skilled labor sector. Afghan workers, often willing to accept lower wages, have contributed to wage suppression in industries such as construction, agriculture, and daily wage labor. Their exit will allow for better wage stabilization and increased employment opportunities for Pakistani workers, fostering a more balanced labor market and greater economic security.

Additionally, their return will ease pressure on Pakistan’s urban housing market. Afghan immigrants have primarily settled in major cities, contributing to rising demand for housing and inflated rental prices. Their departure will help stabilize real estate markets, making housing more affordable for Pakistani citizens. Urban infrastructure, including healthcare, education, and municipal services, will also benefit from reduced strain, allowing for better service delivery and improved living standards.

While the humanitarian dimension of this issue cannot be ignored, the economic case for the return of Afghan immigrants is clear. Their departure will relieve the burden on Pakistan’s public services, ease job market pressures, strengthen the formal economy, and stabilize housing costs. By implementing policies that encourage economic restructuring and better resource management, Pakistan can create a more sustainable and prosperous economic future for its citizens.