Illegal forex inflows
A crackdown on illegal inflows from abroad can help the government lift the volume of remittances to $50 billion annually. Well, this is what foreign currency dealers in Pakistan believe. They insist that the foreign currency black market in the country that runs unchecked accounts for 80% of the total inflows. There is substance in what the currency deals claim, given that it was the successful crackdown on Hundi and Hawala networks during the Musharraf rule in 2000s that the volume of foreign remittances soared from just about one billion dollars to something like twenty times. To be exact, the remittances rose from $1.46 billion in year 2003 to $21.08 billion in 2018, according to the World Bank.
With less than a month to go for the ongoing fiscal year to end, the total volume of remittances is likely to remain around $26 billion to $27 billion as against $31.2 billion received in the previous fiscal year – which means a fall of 14 to 15 per cent. This decline, worth around five billion dollars, is mainly attributed to global inflation, coupled with local political and economic conditions which have distracted many an expat from investing, for instance, in the local real estate sector. Where the government needs to incentivise inflows from abroad, the relevant authorities should prepare a comprehensive action plan to deal with illegal money transfer networks, taking a cue from the Musharraf regime.
Moreover, there is also the need to do away with some banking irritants to entice expats to rely more on legal channels. These irritants include higher cost of sending money in comparison with what the informal channels charge, and the questions – some of them unnecessary – asked by banks from the senders. These irritants can be done away with without much ado.
Published in The Express Tribune, June 5th, 2023.
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