Business | Opinion
Remittances from overseas need to be encouraged
The latest indication of a rise in remittances to Pakistan by expatriate Pakistanis during the first eight months of the financial year, represents an upside and a downside.
- Special to Gulf News
- Published: 00:10 March 19, 2008
The latest indication of a rise in remittances to Pakistan by expatriate Pakistanis during the first eight months of the financial year, represents an upside and a downside.
According to Pakistan's central bank - the State Bank of Pakistan (SBP), over $4.1 billion was received from July to February in remittances from overseas Pakistanis.
A report in a Pakistani newspaper says that remittances from the United States led the trend with $1.16 billion, followed by Saudi Arabia at $761 million and the UAE being a close third at $682 million. Countries of the Gulf Cooperation Council (GCC), the UK and the European Union were the other significant contributors towards this trend.
The monthly average for overseas remittances at over $500 million is significantly higher than the approximate average of $420 million during the same period a year ago.
The significance of these remittances for the Pakistani economy cannot be downplayed. At a time when the country's global trade deficit is on the rise, remittances from overseas Pakistanis continue to make a significant contribution to keeping the country financially afloat.
But as Pakistan enters a challenging period for its economy, its ability to sustain these money transfers cannot be taken for granted. If the Pakistani economy is hit by recessionary trends, the extent to which its expatriates based in other countries will feel inspired is a questionable assumption.
The Pakistani rupee's exchange rate versus the dollar has been sliding in the recent months. In the weeks and months to come, the newly elected government will be faced with tough choices, including some which will be well beyond its control.
One immediate challenge is the fallout from historically high global oil prices. Pakistan, like many other oil importing developing countries, finds itself under stress due to a fast rising oil import bill. Consequently, in an effort to keep the budget deficit under control, Pakistan has been forced to look towards unpleasant choices such as cutting back on planned developmental spending.
The oil price related situation has also hit the prospects for trade and industry. Many Pakistani industries find themselves faced with tough choices when it comes to matters related to expansion of existing operations. Indeed, they must face the difficult choice of tackling a contraction of operations, forced by their inability to make their two ends meet while compared to other more robust players from emerging economies, notably China.
Within Pakistan, the issue of large scale and constantly growing electricity power cuts cannot be easily ignored. The past government that worked under President Pervez Musharraf has failed in reforming the main power generation companies.
Faced with such grave choices, some of Pakistan's main public sector companies such as Pakistan International Airlines and Pakistan Railways, have fallen further into the red. The losses of such companies will inevitably come back to haunt the next government's economic managers.
In this background, sustaining the trend of remittances from expatriate Pakistanis is vital. There should be a constant effort to curb unproductive expenditure in areas such as government expenditure while pursuing more productive avenues such as improving social services to the poor.
On the other hand, it is essential to come up with innovative ideas to attract larger inflows from expatriates. Incentives such as special quotas for expatriates to invest in shares of some of the public sector companies, or investments in dedicated bits of real estate on a preferential basis, may all come to good use.
- The writer is a journalist based in Pakistan.
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