Over the last three decades, Middle Eastern and North African (MENA) economies have had the highest degree of dependency on received remittances worldwide. This region has also had the highest non-oil external trade balance deficit among the developing countries. In this study, we have examined the role of remittances in the trade balance of 11 labour-abundant MENA countries. Our panel regression analysis showed that the inflow of remittances has fostered the trade deficit figures by triggering import-led consumption expenditures. We also found that the final effect of remittances on trade balance depends on the level of domestic capital formation. The negative effect of remittances on trade balance is not statistically significant in countries with higher levels of domestic investment rate. The results are robust after controlling for other drivers of trade deficit such as income, inflation, exchange rate and institutions as well as country and year fixed effects.