Karachi and Islamabad, the two major cities in Pakistan, have been recognized as some of the most affordable places in the world for expatriates to reside in, according to a recent Cost of Living survey conducted by global consultancy Mercer.
These rankings highlight the relatively low cost of living for foreign workers in these Pakistani cities. However, for local residents, the situation is different, as inflation has been steadily increasing since the beginning of the year due to the government’s implementation of challenging fiscal measures required by the International Monetary Fund (IMF). These measures were necessary to access delayed funding from the IMF.
Budget-Friendly Options for Expatriates Identified
Apart from Karachi and Islamabad, several other cities were identified as budget-friendly options for expatriates. These cities include Havana in Cuba, Bishkek in Kyrgyzstan, Dushanbe in Tajikistan, Windhoek in Namibia, Ankara in Turkey, Durban in South Africa, Tunis in Tunisia, and Tashkent, the capital city of Uzbekistan.
Mercer Survey and its Role in Determining Compensation Packages
The Mercer survey plays a crucial role in determining compensation packages for employees on international assignments, considering factors such as currency fluctuations, cost inflation for goods and services, and accommodation expenses. To rank the cities, Mercer’s survey evaluated over 200 components, including housing, transportation, utilities, food, domestic supplies, and entertainment, across more than 400 cities worldwide.
Hong Kong, Singapore, and Zurich Top the List of Most Expensive Cities
On the other end of the spectrum, the survey revealed that Hong Kong, Singapore, and Zurich claimed the top three spots as the most expensive cities globally. Switzerland had a notable presence in the top 10, with Geneva, Basel, and Bern securing the fourth, fifth, and seventh positions, respectively. New York City was deemed the most expensive city in the United States, ranking sixth globally. Tel Aviv in Israel emerged as the eighth costliest city for international workers, making it the most expensive city in the Middle East. Copenhagen and Nassau in the Bahamas completed the top 10, securing the ninth and tenth places, respectively.
Concerns Over Global Economic Outlook and Impact on Pay and Savings
Mercer expressed concerns about the global economic outlook, stating, “Due to the recent introduction of aggressive national monetary policies and the tightening of global financial conditions, many economies are likely to see slower income growth this year, along with rising unemployment.” It added, “Debt levels among many countries remain high, and core inflation has not yet peaked in many markets. Inflation and exchange rate fluctuations are directly impacting the pay and savings of employees who are internationally mobile.”
Impact of Various Factors on Expatriate Salaries and Savings
Among the African cities, Bangui, Djibouti, and Luanda scored high in the global cost of living rankings. The report attributed the impact on expatriate salaries and savings to various factors, including the escalation of the Russia-Ukraine crisis, the emergence of more contagious COVID-19 variants, exchange rate fluctuations, and widespread inflation. Globally, inflation is expected to decrease to 7% this year.
Inflation Outlook in the Middle East and Central Asia
In the Middle East, inflation is anticipated to reach 4.9% in 2024, a decline from the high of 8.7% witnessed in 2022, according to the International Monetary Fund’s Regional Economic Outlook on the Middle East and Central Asia. The Organisation for Economic Co-operation and Development (OECD) adjusted its outlook for headline inflation to 5.9% in 2023, reducing it by 0.