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Brisk movement of Pakistan’s foreign remittances

Remittances have been playing a very significant role for the overall economic development of Pakistan. Therefore, it is important to explore the actual remittance income and its impact on overall economy of Pakistan. Recently, the Middle East has suffered job crisis, the job opportunities are shrinking for the last few years and there are chances that remittances from the Middle East will reduce. As a result, the Government of Pakistan is now facing tremendous challenges to send people abroad for employment.

Remittances have already been emerged as a prime driving force to the economic growth and poverty alleviation in Pakistan. Though jobs in the Middle East are reducing, yet the amount of remittance and the numbers of migrant workers have been increasing gradually. The export of manpower is one of the most significant foreign currency earning sectors of Pakistan. It contributes our national economy in a large measure by increasing foreign exchange reserve, per capita income and employment opportunities.

Overseas Pakistani workers remitted USD 17,875.23 million in first 10 months (July to April) of FY19, showing a growth of 8.45 percent compared with USD16,481.82 million received during the same period in the preceding year. During April 2019, the inflow of worker’s remittances amounted to USD 1,778.90 million, which is 2 percent higher than March 2019 and 6 percent higher than April 2018, according to a data released by State Bank of Pakistan. The country wise details for the month of April 2019 show that inflows from Saudi Arabia, UAE, USA, UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU countries amounted to USD 427.82 million, USD 372.43 million, USD 269.56 million, USD 280.02 million, USD 175.44million and USD 48.19 million respectively compared with the inflow of USD 399.56 million, USD 362.40 million, USD 250.91 million, USD 245.85 million, USD 167.68 million and USD 54.75 million respectively in April 2018. Remittances received from Malaysia, Norway, Switzerland, Australia, Canada, Japan and other countries during April 2019 amounted to USD 205.43 million together as against USD 197.72 million received in April 2018.

According to the State Bank of Pakistan (SBP), among the migrant workers, more than 50 percent have gone to abroad by lending money from others or by selling land to others. A large part of these migrant workers are unskilled or semi-skilled. As a result, they have sent a large part of their income to Pakistan. Most of the migrant workers families are maintaining activities with this money. As a matter of fact, the government becomes more beneficial than family members of the migrant workers. The government gets huge foreign currency because of foreign remittance. The foreign remittance income is not only increasing foreign currency reserve but is also playing a significant role to reduce poverty and to enhance the economic development of Pakistan.

Remittance has been playing a very significant role to the sustainable economic development of a developing country like Pakistan. The government has used remittance to pay the different government and non-government import bills and the installments of different foreign debt and donations. Remittances are used to make import payments and are used for productive investment by the government. A large portion of remittance income is spent for consumption purposes, acquisition of assets, investment in trade and business and to finance import of capital goods in Pakistan. Remittance income of Pakistan is recorded as the second highest foreign currency income. But if the cost of import of raw material is adjusted, then the net earnings from migrant workers’ remittance is higher than that of the textile sector.

Both the formal and informal channels are being using by the Pakistani migrants to send their remittances to their relatives at home. Among the formal channels, two channels are common, such as draft issued by a bank or exchange house and electronic funds transfers into accounts. Some government and private commercial banks are very much active in the remittance market. Among the informal channels, the most used channel is hundi system. The sender and remitter are avoiding tax and violating foreign exchange rules & regulations that may facilitate money laundering.


Challenges facing by Pakistani migrants

The migrant workers of Pakistan have been contributing immensely to the economy with strong positive impact on growth, employment, foreign reserve and balance of payments. The country’s imports would have to be drastically cut down or its current account deficit rose to highly unsustainable levels without foreign remittance. But these migrant workers are regularly facing various types of problems within and outside the country. The following problems are facing by Pakistani migrants within and outside the country; the people who want to go to abroad for employment are suffering from financial problem because most of these people are poor and they don’t have ample resources. However, the non-government cost of migration is very high in Pakistan and it is almost impossible to bear by these poor people. The people who want to go to abroad for doing job are also suffering from efficiency problem because most of the migrant workers of Pakistan are unskilled and low-skilled. That is why they can’t perform their assigned task & duties with effectively & efficiently like the migrant workers of other countries in the world. Pakistani migrants are suffering from training problem where they don’t get any training from the private and government recruiting agencies before pre-departure. Migrant workers of Pakistan are regularly encountering various problems in sending remittances, especially to the remote areas of the country, through formal channels because the process of sending remittance through banks is slow and complicated. Recently, SBP has asked the bank account holders to come personally for biometric verification. Most of the labor opened bank account on their name and gave ATM cards to their families. Now they are abroad and cannot come to Pakistan for biometric verifications. In this situation, they are looking for informal channel for remittances. Government should find a solution for this problem. Pakistani migrants are regularly harassed and sometime physically oppressed in the various airports of the country, when they visit their families and friends. In addition, the present pre-departure legislation of Pakistan is quite vague and complicated and it creates tremendous problems for migrants.

One of the most significant foreign currency earning sectors of our country is manpower exporting. The flow of remittance has influenced directly and indirectly by many factors. One of the important direct factors is competition. There are many countries exporting workers abroad. Thus, Pakistani migrant workers must face tremendous competition with the workers of other countries in the foreign land. For instance, the Government of Pakistan should pay special attention to develop the skills of workers and also should take necessary measures to build-up the mutual trust and good relation with the various countries in the world for saving the valuable income generating sector of the country.

The government should establish different training and learning centers so that the migrant workers could learn about language, behavior, culture, norms, values, behavior, working and geographical environment and so on before going to abroad. The private recruiting agencies have also to establish different training and learning centers in order to train people before pre-departure. The government and private recruiting agencies should send the trained people abroad so that they can fight and survive with the migrant workers of other countries in their working place. The most important aspect where government should focus on is that the government and private banks should increase the speed of their services throughout the country and also decrease the paper work and documentation, which make it very simple and easy for less educated or illiterate migrant workers to send their remittances through formal channel. The government should create investment friendly environment in order to use the remittance money in productive sector. Otherwise, the large part of the remittance money will spend in consumption purpose by the family members & relatives of the migrant workers.

SBP has recently vowed to make mandatory for Pakistanis living abroad to open bank accounts back home to transfer money legally. It is expected that the move would be helpful in curbing illegal transfer of money and frauds. Currently remittances are six percent of Pakistan’s GDP and it is expected that country can get USD 30 billion every year through foreign remittances if the challenges faced by banks and money transfer exchanges are eradicated. De-risking and hundi are the major obstacles to boost the remittances.

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