ECONOMY WATCH

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By: Zeeshan A Khan (economistzeeshan@hotmail.com)

Aug 29 - Sep 04, 2005
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WORKER'S REMITTANCES

GROWTH IN WORKER'S REMITTANCES IN PAKISTAN

Pakistan has become one of the fastest growing developing countries. After September 11, Worker's remittance received by the country is continuously growing and the momentum of growth is gradually increasing. Press release issued by the state bank reveal that Pakistan has received the amount of $4.169 billion as workers' remittances during the last fiscal year (July, 2004 June, 2005) as against $3.868 billion received during July, 2003 to June, 2004 registering an increase of $301 million or 7.77 per cent. Last fiscal year's total amount includes $16.50 million, received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

Comparing last 58 years, the highest amount of $4.23 billion was remitted by overseas Pakistanis during the fiscal year July, 2002-June, 2003. The intensity of growth was so high that worker's remittances jumped to $3744.38 million during July 2002 May 2003 as compared to $2028.18 million during July 2001- May 2002, registering an increase of 84.6%.

The all time monthly highest amount was recorded in March 2005 when US$443.70 million was remitted.

The increase in remittances is due to many reasons. Overseas Pakistani's now have many reservations after Sept 11 incident. They want to keep backup investment in their home country. Secondly, the boost in real estate sector and stock exchange has attracted overseas Pakistani's and they have invested billions of rupees in last few years in these sectors. The scrutiny of Muslim's accounts has forced people to use official channels for sending money. This factor has affected unofficial channels, specifically HUNDI system. However, it is still believed that Hundi system is working efficiently and huge amount of money is transferred every year by this channel.

GLOBAL SCENARIO

Global development Finance 2005 (GDF05), issued by the World Bank, has disclosed some interesting facts. According to GDF05, remittances to developing countries are estimated to have increased by $10 billion (8 percent) in 2004, reaching $126 billion. That increase followed a $17 billion (17 percent) increase in 2003. Much of the $10 billion increase in 2004 occurred in low income countries, where remittances rose by $6.7 billion (18 percent). Since 2001, remittances to developing countries have increased by $41 billion.

Most of the $41 billion increase in remittances to developing countries from 2001 to 2004 was concentrated in South Asia ($17 billion), Latin America and the Caribbean ($13 billion), and East Asia and the Pacific ($7 billion). GDF05 further claims that increases in remittance flows have been particularly strong in China, India, Mexico, Pakistan, and the Philippines. These five countries alone account for $31 billion out of $41 billion increase in remittances to all developing countries during 2001-03.

According to GDF, the reason for surge in remittances is because of cost reduction of sending money via official channels.

DEVELOPING COUNTRIES WITH HIGHEST REMITTANCE FLOWS, 2001 AND 2003 ($ BILLIONS)

 

2001

2003

Change

India

11.1

17.4

6.3

Mexico

9.9

14.6

4.7

China

1.2

4.6

3.4

Pakistan

1.5

4

2.5

Philippines

6.2

7.9

1.7

Poland

1.1

2.3

1.2

Bangladesh

2.1

3.2

1.1

Brazil

1.8

2.8

1

Colombia

2.1

3.1

1

Vietnam

2

2.7

0.7

All developing countries

84.6

116

31.4

(Figures are rounded off)
Source: Global development finance 2005

 


 

WORKERS' REMITTANCES TO DEVELOPING COUNTRIES, 1990 AD 2004 ($ BILLIONS)

 

1990

1995

2000

2001

2002

2003

2004e

Developing countries

31.3

56.7

76.8

84.6

99

116

125.8

Lower middle-income

17.5

34.8

41.9

44.1

49.1

54.8

55.6

Upper middle-income

5.7

8.6

13.1

16.8

18.7

24.4

26.8

Low income

8.1

13.3

21.7

23.8

31.2

36.7

43.4

Latin America and the Caribbean

5.8

13.4

20.2

24.2

28.1

34.1

36.9

South Asia

5.6

10

16

16

22.3

26.7

32.7

East Asia and the Pacific

3.2

9

11.2

12.9

16.6

19.5

20.3

Middle-East and North Africa

11.7

13

13.5

15.2

15.5

16.8

17

Europe and Central Asia

3.2

8.1

11

11.4

11.5

12.8

12.9

Sub-Saharan Africa

1.9

3.2

4.9

4.9

5.1

6

6.1

e = estimate

Source: Global development finance 2005