Easing impact of dip in remittances

There is a tug of war between two schools of thought; on the one hand economists are urging governments to facilitate the revival of economic activities while on the other epidemiologist are urging to adopt a more cautious approach until a vaccine is made available.

Whether it is a relapse of the first wave or the onset of the second, the root cause is lowering the guards too fast and too soon as governments across the globe are under intense pressure to return to normalcy.

The economic woes of Pakistan are not only from the slowdown in local economy but also the slowdown in global economies due to the heavy reliance on remittances send by the Pakistani diaspora abroad.

Here, the alarming situation of falling remittances is presented below based on the data from report recently published by the Pew Research Centre, World Bank. The projected fall in the remittances due to Covid-19 compared with the post financial crisis year of 2009 stands at a staggering decline of around 22%. Compared to East Asia, our region would be the second most affected.

As per the World Bank data, the United States and Gulf Cooperation Council (GCC), which contribute 27% and 23% of the global remittances outflows, respectively, are currently under severe lock down in a desperate effort to curb the pandemic. Also, the movement of foreign workers has been badly affected by the conflicting news about resumption of international flight operations. Mostly, there is an inconsistent approach across the globe when it comes to deciding which international route to allow, which have caused many foreign workers to get stuck on the wrong side of the borders.

So far, as per the data released by the consul general of Pakistan in UAE, there are around 60,000 Pakistanis repatriated from UAE alone under the largest repatriation mission executed ever in the history of Pakistan. Additionally, there have been similar heart-breaking stories of workers continuing to return to Pakistan after losing their livelihoods from across the other GCC countries such as Saudi Arabia.

Unfortunately, the very condition that forced them to leave their loved ones in the search of livelihood abroad still exists and has become even more complicated due to a myriad of issues. So far, there is no word from government about any plan to handle the brewing human and economic crisis only akin to the tragic exodus of expatriate during the gulf war.

Fortunately, many of those returning expats not only acquired valuable entrepreneurial skills abroad but also have considerable savings and are willing to start their own business. The government should facilitate them and even offer SME lending at a preferential rate to take advantage of the lowest interest rate environment in the country.

Many of the returning skilled or semi-skilled workers were employed in the construction sector in the gulf region and their skills and experience can be utilised to build quality houses in the Naya Pakistan Housing schemes.

Banks have to play a vital role here as a comfortable environment to make easy money by investing in government securities is now over and they should venture out to invest in real economic activities. These returning expatriates spent their lives supporting Pakistan’s economy with their remittances and now it is time to support them and welcome them with an open heart and utilise their human and financial capital to reinvigorate the economy and turn the corner faster.

The writer is a financial market enthusiast and attached to Pakistan’s stocks, commodities and emerging technology

Published in The Express Tribune, July 13^th, 2020.

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