remittances on the decline
last couple of years wages
of Pakistani workers in Gulf countries has also been cut down
By FARAZ SIDDIQUI
Jul 17 - 23, 2000
Workers' remittances are always considered as an important component of
balance of payment of the country. But during last decade, a persistent decline
has brought down the volume of low remittances to an alarming low
Last 10 years pattern shows an inflow dipped from $1848 million in
1990-91 to $1060 million in 1998-1999, denoting a shortfall of $788 million in the decade
of 1990s. The decline in fiscal year 1998-99 was much sharp at 28.8 per cent or $429
million, highest during the last ten years. Since 1990-91 a constant yearly decline is
experienced in workers' remittances, in 1991-1992 figures of workers' remittances was
$1467 million, since then till 1993-94 mixed trend was prevailing. In the year 1994-95
remittances showed an increase of $1866 million but since 1995-96 and onwards shows the
diminishing trend which came down to alarming $ 796 million in 1999-2000.
According to economic survey 1999-2000 the main reason for steep fall
during 1998-99 has been the exceptionally large spread that prevailed between the
composite rate and open market rate which discouraged expatriate Pakistanis to send their
remittances through normal banking channels. The yawning gap between official and kerb
rates discouraged Pakistanis to send their remittances through normal banking channels.
The remittances during July-April 1999-2000 exhibited a decline of 9.5 per cent to $795.6
million but cash flow of remittances depicted a rise of 3.2 per cent to $735.2 million.
The decline in aggregate remittances was due to decline in encashments (FEBCs, FCBCs) of
$106.5 million during July-April, 1999-2000. Countrywide analysis suggest that cash
remittances from Kuwait increased sharply by 35.2 per cent primarily due to release of
funds for Iraq-Kuwait war affectees.
The other reason for reversing the trend is the "Hundi"
system because majority of the compatriots prefer private channels to send their money of
high rates and swift services as compared to banking channels. Iraq-Kuwait crisis also a
major factor because it created a severe financial crisis in the region and bulk of funds
have been stopped due to the situation. During last couple of years wages of Pakistani
workers in Gulf countries has also been cut down. So far on Government level no positive
attempt was made to send its people to Gulf and other countries. And foremost freezing the
foreign currency accounts in 1998 nuclear blast was the nail in the coffin which actually
turned the problem in to crises.
Saudi Arabia is the biggest contributor regarding foreign remittances
with 35 per cent in the total cash remittances, but official statistics pointed out an
appalling downward trend in this regard. Foreign remittances from Saudi Arabia in 1991-92
was $ 516.16 million which touched the downward level of $ 236.01 million in 1999-2000.
Saudi Arabia whose present contribution to the total cash remittances is 35 per cent which
was 41.92 in 1990-1991. Intervening period from 1990-91 shows a successive declining
percentage of workers' remittances.
This reverse trend is not particularly associated with Saudi Arabia but
the same situation is being prevailed in other countries like UK, USA, U.A.E, Germany,
Dubai, Abu Dhabi etc. USA is a very important country regarding foreign remittances, the
level of foreign remittances has fallen upto $56.84 million in 1999-2000 from $ 150.34
million in 1990-91. Same trend is also in countries like Canada, Germany, Japan, Norway,
The problem must be given due weightage, first and foremost local banks
should offer attractive packages to motivate the foreign expatriates to bring money under
government channels rather than Hundi system because money through normal banking
transactions can only help the country. But besides this local banks should also provide
swift and safe services in this regard. Government must rationalize the gap between
official rates and kerb rates. Chief Executive General Pervez Musharraf asked the Foreign
Minister to closely look the situation and prepare an incentive package for overseas
Pakistanis whose contribution to the country and economy can not be denied. He assured the
expatriates Pakistani in his visit to Gulf region not to freeze the Foreign Currency
accounts of overseas Pakistanis ever in future. Government is taking interest to export
highly skilled professionals to enhance remittances from abroad.
Due to its significance government should take proper measures to
control the problem of diminishing home remittances not only by enhancing foreign exchange
earnings but also raise their encashments through normal banking channels.