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Finance Minister is preparing a package for overseas Pakistan

From Shamim Ahmed Rizvi, Islamabad
Mar 13 - 26, 2000

Remittance from Pakistani expatriates have fallen to an alarming level during the last decade and the falling trend is continuing despite some measures taken by the government to woo overseas Pakistanis during the last few months. Recently a public sector's banks have come up with announcement of 24 hours delivery package of anywhere in Pakistan coupled with attractive cash prizes through lottery system on remittances by overseas Pakistanis.

Though it is too early to predict any impact of these measures but it is certain that it is not the solution for the problem of diminishing remittances. At its best the bank's efforts in this process will be helpful in channelising some of the money from Hundi to formal banking transaction. It will not be much helpful in enhancing the volume of foreign exchange earning. The problem is not that simple.

The downward trend in remittances from our compatriots working abroad is not a very recent phenomenon. Our graph has been falling since over a decade. Nawaz Sharif's nuclear adventure (some call it misadventure) and its horrendous fall out on the national economy specially the freezing of foreign currency accounts has been a factor only turning the situation into a crises. Nawaz Sharif had faith, compounded by endemic corruption and inefficiency in the country's banking he presided over led to a deep enchantment among Pakistanis working abroad. They felt they were cheated without warning—and they were right.

An official in the Ministry of Finance told this correspondent that remittances from Pakistani expatriates have dropped by $ 1.83 billion in the past 17 years, from 1982-83 to 1998-99, because of a variety of domestic and overseas factors. Details show that in the financial year 1982-83 Pakistanis sent home remittances worth $ 2.88 billion, but in the financial year 1998-99 the quantum of remittances contracted to $ 1.05 billion. Remittances reached its peak at $ 2.88 billion in 1982-83, but since then the workers' remittances decreased continuously and steadily falling to the lowest level.

Pakistan has seen a major setback from Saudi Arabia where official statistics point out an appalling $ 1.12 billion decline in remittances was registered when compared with $ 2.88 billion, the country received in 1982-83. Expatriates in Saudi Arabia transferred foreign exchange equal to $ 1.44 billion to Pakistan in the financial year 1982-83 and by the end of 1998-99 the remittances from that country settled at a record low of $ 318.36 billion.

From Saudi Arabia the country received $ 1,441.96 million worth of remittances in 1982-83 which remained pegged to the same level in 1983-84, but fell to $ 1245.23 million in 1984-85.

From 1985-86 the remittances continued to remain in the reverse gear and further decreased to $ 1,162.87 million in 1985-86, $ 945.52 million in 1986-87, 827.7555 million in 1997-88, 819.95 million in 1988-89, 792.19 million in 1989-90, 681.97 million in 1990-91, 516.16 million in 1991-92, 525.94 million in 1992-93, 493.65 million in 1993-94, 554.08 million in 1994-95, 503,22 million in 1995-96, 474.86 million in 1997-98 and further dropped to 38.36 million in the financial year 1998-99.

Like Saudi Arabia there is also decline in remittances from other major sources of remittances such as Kuwait, Dubai, Abu Dhabi, Qatar, Bahrain, United Kingdom, etc, from 1982-83 to 1998-99. Official sources counted five key factors behind the immoderate fall in workers remittances which include Iraq's invasion on Kuwait, decrease in wages in Gulf, 'Hundi' shifting of family member of workers and lack of government's interest in sending its people to Gulf. Giving details they said Iraq's attack on Kuwait crippled the economies of the Gulf countries, especially Saudi Arabia which footed billions of dollars bill to the United States for retaliating Iraq. Saudi Arabia is still paying millions of dollars to the allied forces that have settled, causing a further unnecessary burden on the economy of that country. This war not only undermined the financial health of Arab countries but also affected the regional countries including Pakistan because the war expenses forced the Arab countries to cut wages, incentives and number of workers.

'Hundi' is another major impediment in the way of remittances, as most of the expatriates prefer this channel to transfer money due to cumbersome banking system in Pakistan. The deposed government froze the foreign currency accounts soon after nuclear tests and this action further breached the trust of expatriates and they further bent towards the unofficial but comfortable channel of transferring money.

The most important factor which led to a sharp fall in remittance is the falling number of Pakistanis working abroad. Thousands of them lost jobs because of economic crunch after the Gulf War. In the past serious efforts were made by the previous governments to send workers abroad by entering into special arrangements with the Gulf countries. However, during the past few years this exercise had been given up with the result there is no growth in remittances and number of workers abroad that was needed to breath new life into the economy. The trend of migration of family members of workers to Gulf has increased during the past few years that causes extra burden on Pakistanis working abroad, rendering them unable to dispatch here some portion of their hard earned money.

Chief Executive General Pervez Musharraf has taken cognizance of this national problem and asked his Finance Minister to prepare an incentive package for overseas Pakistanis whom he found keen to contribute in the economic and national development work. He told the cabinet meeting that he met a lot of Pakistani working in Gulf during his recent visit of the area and was really impressed by their patriotism and love for Pakistan. General Pervez Musharraf during his recent visit to countries in the Gulf region extended meaningful assurances to Pakistanis living there. According to the reports reproduced in local newspapers from the print media of these countries, he referred to the previous government's decision to freeze foreign currency accounts last year and assured the overseas Pakistanis that from now onwards, the foreign currency accounts of overseas Pakistanis in Pakistan's banks, would not be frozen.

This assurance should be translated into a policy decision. The government should introduce special incentive packages for the expatriates in order to attract remittances and improve the banking system for efficient and swift transfer of money from abroad that would help discourage the 'Hundi' system that has deepened its roots over the years.