Remittances good but for how long?

For a cash-strapped country like Pakistan, where key foreign inflows sources are drying out, remittances inflows have become as crucial for the country as it is for the families of oversees workers back home. Latest remittances data failed to excite the market after the country recorded $925 million inflows, which is virtually close to the amount received in the same period last year. The explanation for this unenthusiastic market response is plane and simple: inflows in November are below the psychological level of $1 billion. Not to mention, monthly inflows stayed above $1 billion mark in the past seven out of eight months. However, the situation is not half bad, given that remittances inflows totaled to $ 5.2 billion during the first five months of the current fiscal year, marking an year-on-year jump of 18 percent. For sure, lack of employment opportunities, coupled with poor political condition and migration from the country in search of employment, has been playing a whip hand in increasing workers income from abroad. But given that, nearly 60 percent of the total flows are from Middle Eastern countries, there is a strong reason to believe that growth stems from high oil prices. Similarly, the market relates improvement in inflows from the developed countries, such as UK and USA, which combined accounts for nearly 30 percent of inflows, to the growing fiscal and economic uncertainty in that region. The countrys remittances pattern chims with other developing nations since the recorded flows to developing countries are estimated to have reached $351 billion in 2011, representing a jump of 8 percent compared to 2010, according to The World Banks latest publication released at the start of this month. It ranked Pakistan as the fifth largest recipients of remittances among developing countries. The publication cited both good and bad news for the remittances dependent countries. Good news first: the banks estimates suggest that the growth momentum is likely to remain intact in the coming years as remittance flows to developing countries is expected to continue at a rate of 7-8 percent annually to reach $441 billion by 2014. But, the bad news is that the report highlighted certain downside risks to the forecast, such as debt crisis in Europe and high unemployment rates in high-income OECD countries, citing high unemployment bodes ill for immigration prospects and demand for migrant workers. In the absence of quantitative and qualitative data, it is difficult to forecast long-term outlook for remittances. But, given that the countrys monthly remittances averaged out at around $1 billion during the past five months, it will be safe to assume that the workers inflows will cross $12 billion in FY12.