Save remittances for the future

In the midst of gloomy macroeconomic indicators, the handsome sum remitted by overseas Pakistanis working abroad is making headlines these days.
The income sent home by overseas Pakistanis grew by a whopping 17.7 percent to Rs6.1 billion in the first seven months of the current fiscal year against the same period a year earlier.
Behind the overwhelming inflow data is robust growth in inflows from the UK, Saudi Arabia and UAE, as they have been accounting for more than 50 percent of the total inflows. At the same time, workers inflows from other small contributing regions such as European countries, Switzerland, Australia and Canada have also witnessed growth.
The major driving factors that are helping growth are the initiatives taken by the government to route more remittances through banking channels. Moreover, other factors such as lack of employment opportunities at home, rising poverty and inflation and a growing interest in immigration amid worsening safety and security conditions in Pakistan have been forcing substantial number of Pakistanis to work abroad.
Moreover, the market expects inflows to accelerate further in the near future. The World Bank has projected that the remittance flows to developing countries will increase by 6.2 percent and 8.1 percent in 2011 and 2012, respectively.
In addition to improving the position of the current account balance, remittances also play a key role in poverty alleviation. But the dilemma is that quite a portion of the hard-earned income sent by workers aboard is primarily used to fund consumption, such as for food, health, vehicles, clothing, weddings and pilgrimage expenses, rather than on investments and savings.
A research conducted by International Organisation for Migration Islamabad to study the impact of remittance from Saudi Arabia on households and communities has revealed that around 46 percent of the migrant households were unable to direct any remittances to investments or savings.
Given the current situation and rising dependence on remittance income for consumption, the challenge is to devise plans and strategies to route inflows to long-term investments, since it will not only reduce household dependence on remittance income but will also generate employment opportunities in Pakistan.
Besides, to encourage saving rates, the government should induce expatriate Pakistanis by offering lucrative schemes to invest in treasury bond markets, saving bonds and prize bonds etc.