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In a few months, Pakistan Remittance Initiative (PRI) would be celebrating seven years of its launch. And come to think of it, it is the single most pleasant thing that has happened to this economy during all these years; CPEC being another, though it is yet to bear the promised multi-billion dollar fruits. The PRI, on the other hand, has already produced those fruits.
A recent USAid funded report titled “The Pakistan Remittance Initiative and Remittance Flows to Pakistan” further cements that notion. Written by University of Illinois-Chicago economist Dr. Javaeria Qureshi, the report finds that PRI “is associated with a significant increase in the formal remittances sent to Pakistan as well as a strong shift in the channels used for remittance transfer.”
Qureshi triangulated the data reported by the central bank with the findings of Household Integrated Economic Survey (HIES) conducted with the Pakistan Social and Living Standards Measurement Survey (PSLM) by the PBS. And here is specifically what she found out.
The HIES/PSLM data “shows an increase in the use of banks and a decrease in the use of Hundi and other channels to transfer remittances between 2007-2008 and 2010-2011.” Recall that PRI was launched in October 2009, and the HIES/PSLM survey conducted before and after were in 2007-2008 and 2010-2011.
“The share of households receiving remittances from Hundi falls from around 27 percent in the 2007-2008 rounds to 17 percent in 2010-2011. During 2007-2008 and 2010-2011, the share of households receiving remittances from banks increases from 41 percent to 62 percent, while the share of households receiving remittances from other channels falls from 35 percent to 23 percent,” the report said.
The report also finds that the trend for using banks for remittance was actually in the negative before the launch of PRI, and that its launch caused a sharp break in the trend of channel used.
All these are very comforting findings. However, in the wake of recent slowdown in remittances and increasing reliance on remittances (gauged loosely as percentage of external balance), much more needs to be found out.
For instance, the report relies on 2011 round of HIES/PSLM data, whereas now even 2013-14 numbers are available. It is hoped that the SBP, local academia or think tank can build up on the foundations laid in this report. Responding to a query by BR Research, the report’s author Javaeria also maintained that it is important for future research to analyze more recent data to study the long term effect of PRI and evaluate the effect of the more recent measures that the SBP has implemented e.g. the NRP accounts and remittance-funded debit cards. This so, because the current study is an assessment of the short term impact of PRI, specifically its early years.
Second and this is something that this column has been demanding for some time, that it is about time the central bank should share information about the average size and median of remittance flows from major remitting countries along with the destination district within Pakistan. On a related note, the PBS would also do well to collect information on the number and size of remittances under its HIES/PSLM survey. This information can help to analyze whether remittance channel is in fact being used to whiten money or not; it can also help businesses better understand their markets; identify the potential of converting remittance into investments etc.
Lastly, with remittances growth gradually slowing down, it is time to start thinking how to increase total remittances. The report says that while the PRI led to a significant reallocation of remittances away from the informal channel to the formal channel, given the data available “it is not clear that it has increased the total amount of remittances received.”
Reforms that can lead to an increase in total remittances received, Javaeria says, include increased competition in money transmission markets, particularly cell-phone based transmission which is incredibly convenient, and improvements in information for migrants on the different money transfer services and their relative costs.
“It is also important to not simply focus on increasing total remittances but to explore policy measures that can leverage remittances received for investment and other productive purposes like education instead of consumption,” she adds. Indeed, as this column has previously highlighted, the rolling out of diaspora bonds is something the government needs to step up on; it’s well in line with PML-N’s 2013 manifesto too. Hopefully, good sense will prevail.

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