The significance of remittances for Pakistan’s economy is well-documented; but the precarious nature of the country’s economy every now and then makes it even more important to not let these precious foreign inflows be taken for granted. It is that time again when GDP growth is dwindling and is expected to fall further as domestic demand slows and the economy corrects the macroeconomic imbalances before it enters the growth phase again. Among all the fickle indicators of the Pakistani’s economy, remittances have remained the faithful saviour.
So far things seem sanguine on this front. The recent numbers from the State Bank of Pakistan show that remittances for the 9MFY19 grew by 8.74 percent, year-on-year. This growth rate is almost double of what was seen in 9MFY18 (4.95% YoY). In the last month, March 2019, the foreign inflows from the overseas Pakistanis increased by 10.74 percent versus the inflows in February 2019; however, the year-on-year growth in March inflows declined by 3.2 percent.
During 9MFY19, country-wise inflows show that remittances from Saudi Arabia and UAE have shown a recovery of 1.5 percent and 4.18 percent, year-on-year. However, remittances from other GCC countries continue to fall (6.4% YoY). USA and UK accounted for 31 percent of total remittance in 9MFY19, contributing 24 and 17 percent to the growth, respectively.
The importance of remittances for Pakistan’s economy cannot be overstressed, and the previous efforts by PRI and the central bank and those in the pipeline have been commendable. But there is a need to rise up the curve especially when all other avenues of foreign exchange are under severe pressure and the currency has been depreciated massively in recent times.
It is bracing that the money sent by overseas Pakistanis in USA and UK are up and rising in times when the flows from the traditional corridors have been under duress.
What needed is that attempts be made to revive these traditional corridors by matching the skills requirement with changing job demands in these countries. This can only happen when due share of attention is given to vocational training and skills development – something that the present government did make part of its agenda when it came to power, but solids efforts are still wanting.
Improving the labour export mix is also largely hinged to the improvement in the kind of skills being exported.Also, there is a need to diversify and look for other avenues. Malaysia has emerged as an important source destination for remittance into the country (read: Remittance from Malaysia rising). During 9MFY19, inflows from residents living in Malaysia have accounted for 7 percent of the total remittances with a year-on-year growth of 39 percent.
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