The government placed the remittances data for the three quarters of the current fiscal year before the National Assembly, showing a decline in one of the vital sources of foreign exchange, which if not handled properly could adapt into a bigger problem. According to Federal Minister Zahid Hamid, who put the figure before the parliament, an 11 percent decline was also registered in the demand for Pakistani workforce abroad and a large number of those employed especially in the Gulf States have returned home after losing their jobs. He attributed the decline in remittances to falling oil prices in the international market, decrease in demand for foreign workforce in the oil-rich Gulf countries, and a decline in the wages of the labourers in these countries.
Foreign remittances along with exports and foreign investments are major sources of earnings for a developing nation like Pakistan, which are used to build its foreign currency reserves. Historical records shows that remittances in Pakistan increased to $4,760 million in the fourth quarter of 2016 from $4,698 million in the third quarter of 2016. Remittances in Pakistan averaged $2,544.59 million from 2002 until 2016, reaching an all-time high of $5,529 million in the second quarter of 2016 and a record low of $906 million in the third quarter of 2003.
The past historical shows that the home remittances had contributed a substantial amount within a sensible limit in accommodating current account deficit of the country. Overseas Pakistani workers remitted an amount of $17.46 billion in the first eleven months (July-May) of financial 2017 as compared with $17.84 billion in the corresponding period of last year.
Workers’ remittances from the US fell by 3.22 percent to $2.18 billion compared to $2.25 billion in the same period last year while inflows from the UK decreased by 8.13 percent to $2.08 billion from $2.27 billion a year earlier. Inflows from Saudi Arabia came down from $5.39 billion last year to $5.03 billion, denoting a fall of 6.57 percent.
Remittances from the UAE amounted to $3.9 billion, registering a decline of 0.88 percent during the year. The EU was the only region from where inflows rose by 15 percent to $425 million.
Remittances during May, 2017 amounted to $1.87 billion which were higher by 21.36 percent and 3.77 percent over April, 2017 and May, 2016 respectively owing to the month of Ramadan and coming Eid-ul-Fitr during which higher remittances are usually received.
It is predicted that the total amount of remittances, may not touch the historic level of $19.9 billion witnessed during 2015-16 even if inflows increase further during the month of June, 2017 due to these factors.
This trend is most disappointing because in the immediate future the low oil prices in the international market and deteriorating fiscal trends in oil producing countries where most of the Pakistani labour force is employed and ‘localization requirements’ are shrinking employment opportunities for high-skilled workers from abroad.
The anti-money laundering laws in the US, the EU and many other countries have also reduced the inflows from developed countries to a great extent. It is to be well known that that the exports are declining, imports are increasing rapidly and trade deficit is widening, the decline in home remittances has only added to the deficit in the C/A and worsened the situation.
Pakistan’s foreign exchange reserves have already fallen by $3.51 billion since October, 2016 to $20.52 billion on 2nd June, 2017. Reserves held with the State Bank has dropped by $3.22 billion to $15.7 billion during the same period.
Friendly Middle Eastern countries should be persuaded to continue employing our labour force so that the present flow of home remittances is not affected.
In Pakistan, successive governments have given little attention to reinforce and strengthen these sources of earnings to build foreign reserves, and instead have relied heavily on borrowings, particularly from the international lenders to build these reserves to avoid repeated balance of payment crises.
Despite announcement of a big financial package by the government, and foreign investment, the exports are not showing any encouraging signs. The government is heavily and solely relying on China-Pakistan Economic Corridor (CPEC)-related projects that it hopes would help avert an economic crisis.
Nearly 39,000 Pakistanis have been deported from Saudi Arabia between October and February, according to the Saudi media.
Hundreds of thousands of workers from other countries like Philippines and India have also been sent packing, but the Pakistanis have been deported not just because of violation of local labour rules.
According to the Saudi media, a large number of Pakistani workers were also deported because of their alleged involvement in crime and terror-related incidents.
The Pakistani workers, on the other hand, complained of exploitation at the hand of their Saudi employers. Many of them complained that they had not been paid their salaries for months, causing unease among them as well as their families.
The overall construction slump in the Kingdom has resulted in a drastic reduction in the jobs mainly for the foreign workers.
The government needs to thoroughly look into the reasons behind the fall in this important source of foreign currency and explore remedial measures.
In view of the recent IMF statement warning upcoming challenges for the Pakistani economy, there is no room for complacency for the government.
It needs to wake up and address these concerns; otherwise the economy of the country would slide back to the dire straits it was in few years ago. So far there are no indications that the government is serious to tackle these issues on an urgent basis.