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1- NFC: NEW DECISIONS
2-
HOME REMITTANCES ON THE DECLINE
3- ISLAMIC FUND
4- STOCK MARKET: EMERGING TRENDS
5- MUSHARAKAH-BASED TFC

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HOME REMITTANCES ON THE DECLINE

 

Slow down during first half of the financial year which may not help achieving the target

 


By AMANULLAH BASHAR
Dec 22 - 28, 2003
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Workers home remittances which played a key role in developing a strong foreign exchange reserves by contributing a historic figure of $4.2 billion during 2002-03 fiscal, showing a declining trend during the current financial year.

Despite the remarkable growth in workers remittances during 2002-03, the financial manager to set a realistic target of $3.6 billion for the current fiscal 2003-04, however, experts are of the view that even that target on the lower side may hard to achieve in view of the slow down during first half of the financial year which may not help achieving the target at the end of the year, said financial experts.

Workers remitted $253.08 million in November compared to 328.52 million in October a decline of 22.96 percent. In the month of September, the remittances amounted to $318.38 million, August marked with $280.87 million and July 307.87 million.

Out of the total of $1488 million, $24.89 million were received through encashment and profit earned on foreign exchange bearer certificates and foreign currency bearer certificates.

The overall picture shows that home remittances have sharply declined during the first five months of the year falling by $297 million to $1488 million from July to November 2003. In terms of percentage the overall decline is estimated at 16 percent during the period as compared with the same period last year. During the first five months of the corresponding period last year, the workers had remitted $1785 million while the total remittances received during the whole year were amounted to a record $4.2 billion.

While analyzing the situation, some financial experts attributed the current decline in home remittances to different factors including relaxed conditions in the United States especially with reference to the anti-money laundering campaign and scrutiny measures of the bank deposits of the immigrants.

The fear of being questioned by the authorities, the overseas Pakistanis had started sending their savings to Pakistan. Although, the differential between the official and open market exchange rate is no more attractive for the workers to use non-banking channels to send their money, yet the banks takes much times in delivering the remitted amount as compared to swift handling by the Hundi operators, said market sources. Besides slow process of delivering the remitted amount, the bank charges for dealing with home remittance services were also discouraging factor for using the official channels by the workers, sources said.

According to a family member of a Pakistani workers abroad, there was a scheme of a state-owned bank that a worker willing to send his money through bank draft can do so that the draft would be en-cashed when presented by the family here. However, in one of such cash, when the person went to the bank branch to en-cash the draft carrying clear cut instructions that it can be en-cashed from any branch of that particular bank, the branch staff declined to entertain the customer with the excuse that they were unaware about any such scheme. This shows that our banking system despite using huge budgets for automation still lag in various respects of customer services.

Workers home remittances play a key role in improving the cash flow from external resources not only in the developing countries but also in the countries like China, Malaysia, India, Bangladesh and other emerging economies in this region. Besides offering reliable and speedy banking services, incentive-based policies are required to keep up the performance of this sector.

 

 

Workers Remittances at a Glance:

Years

Remittances(Mln $)

1990-91

1848

1991-92

1467

1992-93

1562

1993-94

1446

1994-95

1866

1995-96

1461

1996-97

1409

1997-98

1489

1998-99

1060

1999-00

984

2000-01

1087

2001-02

2389

2002-03

4300

It may be recalled that workers' remittances were targeted at $ 2.873 billion for the 2002-03 fiscal year. During the first eight months (July-February) the target for the whole is already achieved. Remittances amounted to $ 2.873 billion as against $ 1.399 billion in the same period last year thus registering an increase of 105.3 percent. With 30 percent share in total remittances, the United States had emerged as the single largest source of cash remittances. Remittances from the US amounted to $ 856.6 million and were up by 106.7 percent over the corresponding period of last year. Remittances from the UAE were next in line with $ 630.7 million or 21.2 percent of the total remittances. Remittances from the UAE were up by 106.8 percent against the corresponding period of last year. Remittances from Saudi Arabia stood at $ 369.4 million or 13 percent of the total and were higher by 63.4 percent.

Workers' Remittances (Million $)

Months

2002-03

2001-02

% Change

July

305.44

84.74

260.44

August

286.07

87.91

225.41

September

335.09

91.19

267.46

October

377.18

185.35

103.50

November

351.74

259.87

35.35

December

363.19

189.49

91.67

January

383.22

180.52

112.29

February

342.77

233.85

46.58

July-February

2744.70

1312.92

109.0

Total Remittances including Hajj War Compensations (July-February)

2873.67

1399.45

105.34

 

 

Reviewing the performance of remittances last year, one finds that they averaged $ 356 million during the first eight months and if this trend continues, total remittances for the fiscal year 2002-03 are likely to be $ 4.3 billion-highest ever in the country's history.

The official circles said that main factors contributed to the sharp increase in the inflow of remittances last year include; significant improvements in economic fundamentals, confidence of the expatriate Pakistanis on the economic management of the country, better exchange rate offered in the inter-bank market as against the open market, aggressive marketing of Pakistani banks in foreign countries and motivating the people to send their remittances through banking channel, and crackdown on hundi/hawala system in the Middle East and other parts of the world.