Remittances in the ascendant

The countrys external account concluded the fiscal year in a flimsy state. And had it not been for the multitudes of Pakistanis residing abroad and sending back precious foreign exchange to the country, the situation would have been much worse. Deserving a big round of applause, hard-earned money sent home by overseas Pakistani totalled to a sizeable $13 billion during FY12, with total receipts marking a growth of nearly 18 percent compared to the previous fiscal year. The workers reparation from the four major destinations: Saudi Arabia, UAE, UK, USA, summed to around $10.4 billion, accounting for nearly 79 percent of the total inflows received during the year. On the growth front, inflow from Saudi Arabia led the field. The share contributed from these four countries to Pakistans remittance pie has increased successively over the past five years. With economic red flags rising high in the Western parts of the world, inflows from several European countries and Canada, already accounting for a razor-thin contribution in the countrys total remittances pool, fell further during the year. Undoubtedly, the growth in inflows comes at the heels of initiatives taken by the government to facilitate transfer of funds through formal channels, while some credit goes to stable economic prospectus in oil-rich countries. A preliminary study conducted by PIDE has attributed growth in remittances in the last decade to increase in the stock of Pakistani migrants working abroad and changes in their skill composition, while validating the role of Pakistan Remittances Initiative (PRI) in diverting inflows from the informal to formal channel. Moreover, the study also highlighted other possible drawing cards playing a whip hand in lubricating inflows such as whitening of black money, transfer of undeclared export earnings and receipts from sales of assets abroad. With remittances in the running, as the country realised an average annual growth 21 percent during the past ten years, remittances will continue to aid in containing the current account deficit. Inflows in developing countries are forecasted to grow at 7-8 percent annually to reach $467 billion by 2014, according to World Banks estimates. But, a dangerous cocktail of slowing global economic growth and growing restrictions on foreign workers in the Middle East suggest that taking solace in remittances might put the country through the wringer.