LAHORE: The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has said that foreign remittances flows are crucial which can support the country’s account balance amidst low volumes of foreign direct investment (FDI) and nominal growth of exports.
“Overseas Pakistanis living in Gulf should further be motivated to maintain an upward momentum in remittances, as they contributed more than 60 percent of the total inflows during last couple of months”.
FPCCI former president and Businessmen Panel (BMP) Chairman Mian Anjum Nisar said, this here on Sunday, that remittances can help not only in financing the deficit in import payments but also in foreign debt repayments, suggesting the government to focus on structural reforms, which can revive Pakistan’s economic growth with major focus on incentives for overseas Pakistanis workers.
The Businessmen Panel Chairman said that Pakistan has been witnessing a significant decline in workers’ remittances on a year-on-year basis, however it surged by 5.34% on a month-on-month basis, reaching a total of $2.21 billion, owing to several positive factors, including improved transparency and the implementation of stringent measures against dollar smuggling. These initiatives have helped create a more secure and regulated environment for remittance transactions.
He said that remittances for Sept came in at $2.21 billion, according to data shared by the State Bank of Pakistan. This figure, while an improvement from last month’s $2.09 billion, was significantly lower than market expectations of $2.4-2.5 billion. On a month-on-month basis, remittances rose by 5.3%. However, they declined by 11.24% compared to last year, when remittances stood at $2.49 billion.
In a statement issued here, the BMP Chairman asked the government to announce attractive package for overseas Pakistanis to enhance the volume of foreign inflows because this is the only hope which can support the country’s account balance, as the remittances have started declining, showing a huge fall during last month.
If government supports overseas Pakistanis and provides them incentives, they can play a vital role in boosting Pakistan’s economy through their remittances and investments for high economic growth.
If the falling trend persists in the remaining months of this fiscal year, it could pose serious problems for the economic managers as the govt heavily relies on remittances, which are much higher than the country’s total export proceeds.
The BMP Chairman observed that the development comes at a crucial time for Pakistan, which has seen its foreign exchange reserves deplete due to external debt servicing and lower inflow of dollars.
Mian Anjum Nisar appreciated the SBP, which under its home remittances promotion measures, allowed Exchange Companies to maintain separate foreign currency accounts for each Money Transfer Operator.
The State Bank of Pakistan and the Arab Monetary Fund has signed a memorandum of understanding to facilitate remittances from Arab countries with official channels. The government and the SBP have been trying to stop remittances through illegal channel, which not only destabilizes the exchange rate but also reduces inflows. He believes that the MoU with the AMF would help Pakistan bring most of the inflows through the banking channels.
Arab countries contribute about 55 per cent of the total remittances. In FY23, Pakistan received $27.3 billion in remittances compared to $31.2bn in FY22, showing a shortfall of $4.2bn. This shortfall was a cause for concern as the country faced a default-like situation at the beginning of the current fiscal year FY24. It is believed that this $4.2bn was either sold in Dubai at much higher rates or sent home through illegal channels.
In the first week of September, the government initiated a crackdown against illegal currency businesses and dollar smuggling, which produced positive results, and the rupee started appreciating. However, the latest move to sign MoU with the AMF is expected to be helpful for the country in receiving maximum remittances through official channels.
Linking Raast with Buna will facilitate Pakistanis to remit money in real time. The MoU is signed to establish a framework of cooperation between Buna, the cross-border payment system operated by Arab Regional Payments Clearing and Settlement Organization “ARPCSO”, owned by AMF, and Raast, Pakistan’s Instant Payment System.
The SBP said the integration of Raast with Buna aims to facilitate cross-border remittances between the Arab region and Pakistan through formal channels. This initiative will benefit individuals as well as businesses not only through instant, safe and cost-effective cross-border payments, but also by strengthening economic, financial, and investment ties between the Arab countries and Pakistan.
This resonates with the shared vision of innovating cross-border payment solutions to offer safe and efficient cross-border instant payment access for individuals and corporate, he said.
Mian Anjum said this MoU is a significant strategic achievement that opens the door to a closer connection between Pakistan and the Arab region. He said the integration of the two payment systems will increase remittances to Pakistan through formal channels, with enhanced speed, safety, and savings in these cross-border transactions.
Copyright Business Recorder, 2023
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