Remittances from overseas Pakistanis touching new highs

$673.50 million record remittances received in Dec 2008

By Saad Khan

KARACHI: Pakistan’s overseas workers sent the highest-ever amount of $673.50 million as remittances in December 2008, beating the previous record of $660.35 million received in September 2008.

The amount of $673.50 million received in December 2008 showed an increase of $194.24 million, or 40.53 percent, when compared with $479.26 million received during December 2007.

Overall, in the first half (July-December 2008) of current 2008-09 fiscal year, the country received an amount of $364 billion as workers’ remittances as against $306 billion during the same period of the last fiscal year showing an increase of 18.71 percent. The amount of $364 billion includes $0.37 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

The monthly average of remittances in July 2008 to December 2008 period comes to $606.67 million, up $95.61 million or 18.71 percent when compared with the corresponding period last year.

The inflow of remittances in the Jul-Dec 2008 period from USA, Saudi Arabia, UAE, GCC countries including Bahrain, Kuwait, Qatar and Oman, UK and EU countries amounted to $903.49 million, $714.90 million, $699.43 million, $596.54 million, $239.82 million and $111.41 million respectively as compared to $874.21 million, $563.06 million, $500.33 million, $457.21 million, $227.23 million and $88.99 million respectively in the Jul-Dec 2007 period. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first half of the current fiscal year 2008-09 amounted to $374.05 million as against $354.18 million in the same period last year.

During December 2008 remittances from UAE, USA, Saudi Arabia, GCC countries including Bahrain, Kuwait, Qatar and Oman, UK and EU countries amounted to $165.18 million, $136.37 million, $114.65 million, $100.33 million, $50.87 million and $30.39 million, respectively as compared to $77.33 million, $140.45 million, $81.25 million, $77.21 million, $29.82 million and $12.90 million in December 2007. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during December 2008 amounted to $75.66 million, up from $60.15 million received in the same month last year.

Workers remittances are the second largest source of foreign inflows in Pakistan. Research has shown that there is a link between the development of financial sector and remittances in the long run. There are a host of other important development variables—poverty, inequality, growth, education and infant mortality—which are effected by the inflow of remittances. Improvement in these variables develops the country’s human capital thereby developing the economy in the long run. The major problem with the inflow of remittances is that they are being sent back home through informal channels—hundi and hawala. It is estimated that the amount sent by means of informal channels is at least equivalent to the amount sent by formal channels. Experts believe if the government can tap this huge potential by improving the mechanisms of formal channel, this alone can lead to the aversion of any balance of payment crisis. Some of the measures which can attract inflows through the formal channels can be: quotas may be reserved for overseas Pakistanis in all government schemes for setting up agro-based and small-scale industries in different parts of the country; the Overseas Pakistanis Foundation should be made to play a more active role in the development of industrial estates; the terms governing holding non-residency foreign currency accounts and investments in financial assets may be made more liberal.

Source: Daily Times, 14/1/2009

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