Remittances Set to Scale New Peak

Remittance inflows to Pakistan are expected to hit new peak during the current financial year following a positive economic indicators, political stability and increase in workers outflow in the past two years, Khaleej Times has learnt.

Pakistan, one of the top five recipients of remittances globally, with billions of dollars sent home by overseas Pakistanis every year, is expected to receive more than $33 billion workers’ remittances during the financial year 2024-25. It received $30.25 billion remittances in 2023-24 compared to $27.33 billion in fiscal year 2022-23, registering a year-on-year growth of 10.7 per cent after receiving record $3.24 billion in May 2024.

Overseas Pakistan residing in Saudi Arabia and the UAE will continue to lead remittance table as they contributed over 40 per cent of total remittances in 2023-24 as they remitted $12.95 billion as against $11.18 billion in 2022-23, reflecting an increase of 15.82 per cent despite difficult economic conditions across the globe.

Workers residing in Saudi Arabia and the UAE remitted $37.74 billion during the last three financial years (2022-24) and are expected to sustain double-digit growth in coming years.

Globally, overseas Pakistanis sent $141.25 billion during the past five financial years (2019-24) and provided a much-need cushion to economy during the pandemic and slowdown in global economy.

Workers outflow

Analysts and economic experts said the country is expected to sustain strong double-digit growth in remittances this year due to increase in worker outflows in the past two years. They said increase in immigration to developed nations and Gulf states will play an important role in boosting remittances, addressing economic and social challenges as well as fostering a bright future of the country.

Latest data indicates that on an average 850,000 Pakistanis immigrated to other countries in last two years (2022-23) compared to average of 323,000 people between 2017-21, increasing total number of overseas Pakistanis to more than 11 million. The trend is expected to continue in coming few years that will ultimately help achieve up to $50 billion remittances annually by 2029-30 financial year.

“We are offering significant incentives to banks and exchange companies in face of margins to bring maximum possible inflows from overseas Pakistanis to the homeland,” according to an official of State Bank of Pakistan — the central bank.

The World Bank, in its recent report ‘Migration and Development Brief 40’, expected that remittances in Pakistan will recover and grow at about seven per cent to reach $28 billion in (calendar year) 2024 and increase another four per cent to about $30 billion in 2025. The report said Pakistan emerged among the top five recipient countries for remittances in 2023.

“The top five recipient countries for remittances in 2023 are India with an estimated inflow of $120 billion, followed by Mexico ($66 billion), China ($50 billion), the Philippines ($39 billion), and Pakistan ($27 billion),” according to the report.

Govt’s actions

Analysts also attributed the increase in remittances to the recent crackdown against illegal currency traders like hundi-hawala operators in bordering areas, crushing the black currency markets and wiping out informal traders.

“The cleanup operation encouraged expatriates to remit the money through official channels, thereby surging the inflows in the documented economy,” says an analyst.

He said the higher remittances received during the financial year 2023-24 can also be attributed to significantly higher number of Pakistanis immigrated to other countries in last two years (2022-23).

“There is a strong demand of human capital and skilled workers in the US, Europe, and Gulf region and Pakistan can bridge the gap by improving its services sector,” he said.

Workforce strategy

Referring to a latest research report, he said Europe has required more than two million foreign workers annually due to aging population and negative population growth while the US will face a shortage of four million healthcare professionals by 2026. “Europe will be facing a shortage of 50 million skilled workers by 2035 and we must take advantage of the situation by evolving a workforce strategy focusing on IT sector,” he said.

“We must provide vocational training and language skills to our workforce as these skills can help avail job opportunities for IT experts as well as for machine operators, mechanics, electricians, dental hygienists and chefs. The authorities concerned must collaborate to develop a workforce strategy catering to the needs of developed markets across the globe,” he said while referring to a policy paper compiled by Azra Naheed Centre for Research and Development.

In a research note, Topline Research said the remittance inflows were better than its expectation as confidence of Pakistani diaspora on the domestic economy is on the rise ahead of the $7 billion International Monetary Fund (IMF) programme.

Experts said that massive home remittances inflows will help to reduce the pressure on the external account of the country. They are of the view that higher momentum in remittances is likely to persist due to stability in the Pak rupee-US dollar rate and new IMF programme, awaiting its executive board approval following a staff level agreement announced last month.

With a share of eight per cent of GDP, home remittances play a significant role in supporting the country’s external account, stimulating Pakistan’s economic activity as well as supplementing the disposable incomes of remittance-dependent households. Many believe the remittance inflows should rise at a steady pace since more than 11 million Pakistanis live overseas, of which 65 per cent regularly send money back to their home country.

“We believe Pakistan can increase remittance up to $50 billion in the coming years through streamlining processes and providing incentives through the Pakistan Remittance Initiative,” says an expert.

A senior government official said overseas Pakistanis will be facilitated in sending remittances, with Rs90 billion allocated in federal budget 2024-25 for this purpose, recognising their crucial role in the economy.

There is no second opinion that remittances stabilise the country’s balance of payments, reduce the trade deficit, and strengthen the value of the Pakistani rupee. They also contribute to poverty reduction and economic development by providing households with a much-needed source of income.

— muzaffarrizvi@khaleejtimes.com

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