Monthly remittances coming from overseas Pakistanis seem much more sustainable today than they were last year when the world was hit by COVID-19. While last year there were conjectures and speculations that border closure, air travel restrictions, job losses and returning migrants would only be able to maintain the surge in remittances for a brief period, monthly remittances have continued to stay above $2 billion mark for a straight 14 months and above $2.5 in the last five months. That should account for some sustainability in the elevated monthly remittances.
Credit must be given to Pakistan Remittance Initiative (PRI) and State Bank of Pakistan (SBP) for initiatives and tax and non-tax incentives aimed at promoting use of official channels, which will bear fruits even after all COVID-related restrictions are lifted. Government efforts are hinged on use of digital financial services and formal channels, acting as a booster to an otherwise bleak expectations by the world at the beginning of the pandemic. Curtailed cross-border travel in the face of COVID-19 and philanthropic and religious transfers added to SBP’s efforts for the foreign exchange market reforms. The government is now in the process of approving the National Remittance Loyalty Programme (NRLP) aimed at offering monetary and non-monetary benefits to lure Overseas Pakistanis to use official channels.
Remittances stood at $2.702 million in July 2020, almost flat month-on-month, and down by two percent year-on-year. However, this decline was anticipated due to lower number of working days with Eid-ul-Azha falling in the same month. And usually, the remittances flow slowdown right after the religious festivities, which in this case was last week of July-21.
However, there is much more scope for improving the remittance landscape if the authorities address the issues of out-migrants and country’s manpower exports. Though Pakistan’s manpower export surpassed India and Bangladesh in 2020, one must not ignore the declining trend since 2015. Also, a key inhibiting factor, which could also become a key growth factor is the skillset of the migrants. Pakistan is among the top migrant exporting countries with over ten million Pakistanis already out of the country for work with majority working in GCC countries, but majority of the migrants are semi-skilled or low-skilled, which makes them particularly vulnerable to volatile events such as COVID-19 pandemic. And if most of the growth witnessed in FY21 was due to switching to legal and formal banking channels, sustaining the current momentum in remittances also requires a growth in manpower exports.
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