EDITORIAL: Remittances have soared by 33 percent to 17.845 billion dollars within the first half of the current fiscal year against the same period last year, emerging as the most important desired source of foreign exchange earnings reflecting an irrefutable fact: exporting labour associated with remittance inflows should be proactively pursued by the government as these inflows are inching ever higher relative to exports.
One would hope that this realisation would have two major policy implications. First and foremost; the massive fiscal and monetary incentives meted out to exporters must now be weighed against an increase in the foreign exchange earnings capacity of these measures, if any, against incentives that can be extended to further incentivise remittance inflows.
If one adds the element of subsidising utilities for exporters as extended on 6 October 2023, at a cost to the taxpayers, of 110 billion rupees and a diametrically opposing policy of keeping the rupee artificially high, which is an anti-export measure, again a Dar policy, the outcome should have been expected: a budget deficit ballooning to an unsustainable over 7 percent, foreign exchange reserves hitting a low of under 3 billion dollars with the looming threat of default that led to overruling these policies with the objective of enabling the government to once again access loans from multilaterals and bilaterals.
The ongoing 7 billion dollar 37-month-long Extended Fund Facility (EFF) of International Monetary Fund (IMF) programme notes that “despite all this support, the business sector has failed to become an engine of growth, and the incentives eventually weakened competition and trapped resources in chronically inefficient (including perpetually “infant”) industries”; and requires the government to end all incentives to all productive sectors, including exporters, however demand for these very incentives is strengthening by the day and given past precedence it is a matter of serious concern whether the administration, like its predecessors, maybe tempted to implement policies of the past once Pakistan is no longer suffering from balance of payments issues or, in other words, prioritise political considerations over economic considerations.
Be that as it may, the effort by the State Bank of Pakistan (SBP) to facilitate remittances must be appreciated and the plugging of the leak through the Afghan route has further shored up the rupee-dollar parity, thereby rendering official inflows more attractive than using the illegal hundi/hawala system.
And second; the element of under- and over-invoicing has always existed in Pakistan – a reason for lower foreign exchange inflows than should be the case for both importers and exporters (many of whom rely on imports of raw materials for their finished products).
In addition, it is relevant to note that the 10 October 2024 documents uploaded on the IMF website pertaining to the ongoing EFF stated that the Pakistani authorities requested “maintaining the shortening of the period for repatriation of export proceeds as appropriate given still fragile external conditions.”
It is relevant to note that the Opposition with considerable reported support amongst overseas Pakistanis tried to link remittance inflows with domestic politics. This failed because the bulk of remittance inflows is in support of families back home and that simply cannot be linked to politics.
By the same logic charity to specific institutions is not linked to domestic politics but on the charitable institutions’ administration, which is why attempts to derail support for Shaukat Khanum Cancer Hospital have consistently failed. One can only hope that our politicians desist from such negative campaigning because not only do they not succeed but also because it hurts the people they claim to serve.
Copyright Business Recorder, 2025
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