EDITORIAL: Home remittance inflows together with export revenue are the most desired forms of earning foreign exchange and, in this respect, it is relevant to note that the contribution of remittances rose in relation to exports in 2020-21 – at 29.4 billion dollars compared to exports of 25.3 billion dollars. The rise in both remittances and exports last year is attributable to the pandemic as the global lockdown led to not only (i) a near cessation of the operation of the hundi/hawala system (confirmed by the Forex Association President who stated that “closure of commercial flights compelled the remitters to adopt banking channels to send their money”) but also to (ii) the diversion of export orders from regional countries (India, Bangladesh) to Pakistan. The focus of the government today is and must therefore not only be to sustain these two positive trends but also that they should maintain their growth trajectory.
The State Bank of Pakistan (SBP) - to ensure that the reliance on official channels becomes entrenched in the psyche of the remitters - is set to launch a National Remittance Loyalty Programme (NRLP) before October 2021, as per a Business Recorder exclusive, envisaging incentives/rewards for remitters based on points accumulation: on 10,000 dollars remitted each year the reward will be one percent, on 30,000 dollars remitted each year the reward will be 1.5 percent. While the programme is reportedly still being firmed up and fine-tuned, yet one is sure it would require that the remitter is a non-resident, the recipient of the remittance is a member of the remitter’s immediate family and set an upper limit on the remittance amount for eligibility for reward to ensure that it is not abused by either the money launderers or those engaged in over- and under-invoicing.
Remittances in July 2021 were estimated at 2.7 billion dollars – the same amount as in June 2021 with the SBP stating that “seasonal pre-Eid-related inflows helped give a boost to remittances during June;” and one may assume with Eid in July the inflows were sustained. One would have to wait and see the inflows in August to ascertain a trend. In this context, it is relevant to note that the source of these inflows is critical in terms of our foreign policy initiatives, given Foreign Minister Shah Mehmud Qureshi’s repeated statements at various international and domestic fora that the administration’s focus is on economic diplomacy.
The UAE and Saudi Arabia continued to play the lead role accounting for remittances of 13.77 billion dollars during July-June 2021 with the United Kingdom sourced remittances amounting to 4.1 billion dollars and the United States at 2.7 billion dollars. Exports to the US accounted for 19.7 percent share in July-March 2020-21, the UK 8.1 percent, Germany 6.2 percent and China at 9.7 percent though the UAE at 3.9 percent and Saudi Arabia were not major export markets.
It is also important for the government to prioritize incentives. The export sector receives hundreds of billions in incentives in each budget whereas NRLP is projected to cost around 13 billion rupees. It is therefore important to note that this is perhaps just the beginning and not the end of such incentives and we propose that the government also consider instituting a scheme for allotment of a low-cost house to the remitters selected through a lucky draw near their permanent residence. This may serve as an icing on the cake to lure our diaspora in the Gulf countries to use formal channels for their remittances to their home.
Copyright Business Recorder, 2021
Comments
Comments are closed.