We should thank our stars that overseas Pakistanis have come to our rescue when the country's chips are down in most of the areas. According to the latest data released by the State Bank, they have sent home US $1.192 billion during May, 2012 as compared to $1.049 billion received in the same month last year, showing an impressive growth of 13.56 percent. The record was even better during the first eleven months (July, 2011 to May, 2012) of the current fiscal year. During this period, they remitted an amount of $12.069 billion which was higher by 19.54 percent than $10.096 billion received in July-May, 2011. Monthly average during July-May, 2012 comes out to $1.097 billion as against $917 million in the corresponding period last year. Based on this trend, total remittances during the year 2011-12 could easily cross $13 billion which would be a record level. A sharp increase in home remittances, averaging more than one billion dollars a month, is definitely a very favourable development for the country, especially at a time when other components of the balance of payments like merchandise account and foreign inflows are showing deterioration of various degrees and earnings of the expatriates are supposed to be shrinking due to recessionary tendencies in developed countries, particularly the US and the EU. Also, it needs to be noted that home remittances are unrequited transfers and, therefore, like export receipts, can be freely used and do not add to the debt burden of the country. Their healthy impact on the current account, exchange rate and foreign exchange reserves of the country is more than obvious. If their growth was not that robust, the country would have lost much of its foreign exchange reserves by now and forced to borrow from abroad including from the IMF at very stringent terms. However, it needs to be mentioned that even the present healthy level of home remittances is not enough to neutralise fully the negative impact of trade and services accounts on the current account balance. As such, while welcoming positive news on home remittances, it was also very important for economic managers of the country to seriously analyse the reasons behind stagnation in export receipts. Productivity of the economy has of course to be increased for this purpose by improving energy supplies, increasing investment and ensuring good governance, etc. It is of utmost importance for the country to increase the level of exports by a considerable margin in order to achieve a sustainable position in the external sector for a longer period because most of the analysts agree that bonanza of home remittances cannot last for ever to give a helping hand to the C/A balance and the economy of the country. Such a conclusion is based on the uncertainty regarding the continuity of upward trend in home remittances. State Bank always says that high growth of home remittances was attributable to the Pakistan Remittance Initiative (PRI) launched with other stakeholders including the Ministry of Finance and Overseas Pakistanis. The initiatives under the PRI project include: a) preparation of national strategies on remittances, b) taking all necessary steps to implement the overall strategy, c) activation of an advisory role for the financial sector in terms of preparing a business case, relationship building with overseas correspondents, creating separate efficient remittance payment highways and d) establishing a national focal point for overseas Pakistanis through a round-the-clock call centre (021-111-222-774) with toll free lines and a separate website. Obviously, the PRI can help the smooth flow of foreign remittances and increase their growth to a certain extent but cannot be the only reason for such a high jump in their level. It is quite possible that narrowing down of the official and unofficial exchange rate of the rupee, apprehensions of the overseas Pakistanis about the conditions in host countries and financing of the terror activities in Pakistan by some hostile countries may be some of the other factors responsible for such a sharp increase in home remittances. Anyhow, it is high time that the phenomenon of rising remittances is fully analysed by the government with a view to ensuring their growth over a longer period. Alternative strategies must also be worked out in case home remittances are unable to maintain the present momentum. Such an effort needs to be undertaken on fast track basis because the country is rapidly losing its foreign exchange reserves and there are no prospects of reversal of this trend in the near future because of a weak external sector position.
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