Sluggish inward remittances

Developing countries suffer when their nationals move to greener pastures in search for superior incomes but this loss is partially mitigated as part of the income is invested back in the home country, either in the form of cash sent to family members or through investments. For a country with a weak economic outlook, inward remittances by expats play an imperative role in maintaining the balance of payments. This is why stagnation in the amount of inward remittances is not considered good news. The State Bank of Pakistan, in its latest evaluation of Pakistan’s economy has stated that the rate of growth in inward remittances continues to remain sluggish. Compared to the previous fiscal year, net inflows did not grow substantially during the July-May period of the fiscal year 2015-16. This performance is, in fact, better than that of several other countries where growth in foreign inflows is almost at a standstill.

The decline has been attributed to several factors not the least of which is the current state of the global economy. Ever since the 2008 recession, the economies of developed countries where most Pakistani expats reside have been slow to bounce back. Consequently, employment opportunities and incomes have dwindled. Most recently, the refugee crises in Europe, tighter immigration regulations and falling oil prices have contributed to lower incomes for expats. Given that the event dominating global economic news at present is the fallout of Brexit and its consequences for migrant workers, it can be expected that the downward trajectory of foreign inflows will continue into the fiscal year 2016-17. According to the State Bank, the government and financial sector can take steps to improve this trend. It has been proposed that the government should make diplomatic arrangements to change the labour situation in Gulf States. Furthermore, money transfer companies and commercial banks have been advised to improve their operational mechanisms as to encourage the remittance business. Meanwhile, the government must look to other means of shoring up the balance of payments.

Published in The Express Tribune, July 14^th, 2016.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.