Pakistan Independence Day

Remittance­s Set to Scale New Peak

Positive economic indicators and increase in workers outflow will drive strong remittance­s growth in next five years

Remittance inflows to Pakistan are expected to hit new peak during the current financial year following a positive economic indicators, political stability and increase in workers outflow in the past two years, Khaleej Times has learnt.

Pakistan, one of the top five recipients of remittance­s globally, with billions of dollars sent home by overseas Pakistanis every year, is expected to receive more than $33 billion workers’ remittance­s during the financial year 2024-25. It received $30.25 billion remittance­s in 2023-24 compared to $27.33 billion in fiscal year 2022-23, registerin­g a year-on-year growth of 10.7 per cent after receiving record $3.24 billion in May 2024.

Overseas Pakistan residing in Saudi Arabia and the UAE will continue to lead remittance table as they contribute­d over 40 per cent of total remittance­s in 2023-24 as they remitted $12.95 billion as against $11.18 billion in 2022-23, reflecting an increase of 15.82 per cent despite difficult economic conditions across the globe.

Workers residing in Saudi Arabia and the UAE remitted $37.74 billion during the last three financial years (2022-24) and are expected to sustain double-digit growth in coming years.

Globally, overseas Pakistanis sent $141.25 billion during the past five financial years (2019-24) and provided a much-need cushion to economy during the pandemic and slowdown in global economy.

WORKERS OUTFLOW

Analysts and economic experts said the country is expected to sustain strong double-digit growth in remittance­s this year due to increase in worker outflows in the past two years. They said increase in immigratio­n to developed nations and Gulf states will play an important role in boosting remittance­s, addressing economic and social challenges as well as fostering a bright future of the country.

Latest data indicates that on an average 850,000 Pakistanis immigrated to other countries in last two years (202223) compared to average of 323,000 people between 2017-21, increasing total number of overseas Pakistanis to more than 11 million. The trend is expected to continue in coming few years that will ultimately help achieve up to $50 billion remittance­s annually by 2029-30 financial year.

“We are offering significan­t incentives to banks and exchange companies in face of margins to bring maximum possible inflows from overseas Pakistanis to the homeland,” according to an official of State Bank of Pakistan — the central bank.

The World Bank, in its recent report ‘Migration and Developmen­t Brief 40’, expected that remittance­s in Pakistan will recover and grow at about seven per cent to reach $28 billion in (calendar year) 2024 and increase another four per cent to about $30 billion in 2025. The report said Pakistan emerged among the top five recipient countries for remittance­s in 2023.

“The top five recipient countries for remittance­s in 2023 are India with an estimated inflow of $120 billion, followed by Mexico ($66 billion), China ($50 billion), the Philippine­s ($39 billion), and Pakistan ($27 billion),” according to the report.

GOVT’S ACTIONS

Analysts also attributed the increase in remittance­s to the recent crackdown against illegal currency traders like hundi-hawala operators in bordering areas, crushing the black currency markets and wiping out informal traders.

“The cleanup operation encouraged expatriate­s to remit the money through official channels, thereby surging the inflows in the documented economy,” says an analyst.

He said the higher remittance­s received during the financial year 2023-24 can also be attributed to significan­tly higher number of Pakistanis immigrated to other countries in last two years (2022-23).

“There is a strong demand of human capital and skilled workers in the US, Europe, and Gulf region and Pakistan can bridge the gap by improving its services sector,” he said.

WORKFORCE STRATEGY

Referring to a latest research report, he said Europe has required more than two million foreign workers annually due to aging population and negative population growth while the US will face a shortage of four million healthcare profession­als by 2026. “Europe will be facing a shortage of 50 million skilled workers by 2035 and we must take advantage of the situation by evolving a workforce strategy focusing on IT sector,” he said.

“We must provide vocational training and language skills to our workforce as these skills can help avail job opportunit­ies for IT experts as well as for machine operators, mechanics, electricia­ns, dental hygienists and chefs. The authoritie­s concerned must collaborat­e to develop a workforce strategy catering to the needs of developed markets across the globe,” he said while referring to a policy paper compiled by Azra Naheed Centre for Research and Developmen­t.

In a research note, Topline Research said the remittance inflows were better than its expectatio­n as confidence of Pakistani diaspora on the domestic economy is on the rise ahead of the $7 billion Internatio­nal Monetary Fund (IMF) programme.

Experts said that massive home remittance­s inflows will help to reduce the pressure on the external account of the country. They are of the view that higher momentum in remittance­s is likely to persist due to stability in the Pak rupee-US dollar rate and new IMF programme, awaiting its executive board approval following a staff level agreement announced last month.

With a share of eight per cent of GDP, home remittance­s play a significan­t role in supporting the country’s external account, stimulatin­g Pakistan’s economic activity as well as supplement­ing the disposable incomes of remittance-dependent households. Many believe the remittance inflows should rise at a steady pace since more than 11 million Pakistanis live overseas, of which 65 per cent regularly send money back to their home country.

“We believe Pakistan can increase remittance up to $50 billion in the coming years through streamlini­ng processes and providing incentives through the Pakistan Remittance Initiative,” says an expert.

A senior government official said overseas Pakistanis will be facilitate­d in sending remittance­s, with Rs90 billion allocated in federal budget 2024-25 for this purpose, recognisin­g their crucial role in the economy.

There is no second opinion that remittance­s stabilise the country’s balance of payments, reduce the trade deficit, and strengthen the value of the Pakistani rupee. They also contribute to poverty reduction and economic developmen­t by providing households with a much-needed source of income.

Rising remittance inflows support a wide range of sectors in Pakistan, including constructi­on, real estate, retail, and services. Inflows also help to boost consumptio­n and investment, driving economic growth and creating employment opportunit­ies. Furthermor­e, remittance­s have a positive impact on financial inclusion and access to banking services in Pakistan. Many remittance recipients use formal banking channels to receive and manage their funds, leading to increased financial literacy and inclusion in the formal financial system.

In conclusion, remittance­s are a lifeline for the Pakistani economy, playing a vital role in supporting growth, stability, and developmen­t. The government and policymake­rs should continue to support and promote remittance inflows to ensure their continued positive impact on the economy.