WEB DESK: There was a time when home remittances were increasing by leaps and bounds, promising a healthy future for balance of payments position of the country. These hopes, however, have somewhat faded with the advent of new data in the recent months.
According to the latest figures released by the State Bank on 10th May, 2016, workers’ remittances amounted to dollar 1.657 billion during April, 2016 which were 3 percent lower than the previous month and only one percent higher than April, 2015. The country-wise details showed that inflows from Saudi Arabia, the UAE, USA, UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU countries amounted to dollar 488.78 million, dollar 345.99 million, dollar 189.84 million, dollar 221.88 million, dollar 199.53 million and dollar 38.95 million, respectively, compared with the inflows of dollar 519.65 million, dollar 398.41 million, dollar 214.45 million, dollar 186.96 million, dollar 193.13 million and dollar 27 million, respectively, in the corresponding month last year. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries amounted to dollar 170.98 million as against dollar 100.49 million in April, 2015.
This trend in the pattern of remittances during 2015-16 showed that they started falling after November, 2015 when the growth rate was the highest at 16.5 percent. December, 2015 growth was negative by 1.2 percent and the rate has been fluctuating within a narrow range thereafter. However, remittances sent by overseas Pakistanis rose modestly by 5.0 percent to dollar 16 billion during the first ten months (July-April) of this fiscal year. Given the monthly average inflow of about dollar 1.6 million, the country is set to receive over dollar 19 billion remittances during the current fiscal.
Though the amount of remittances is still of considerable importance, yet the deceleration in their rate of increase or a fall in inflows in the past several months is definitely a cause of concern. Such a trend is all the more disturbing because it is not likely to be reversed in the foreseeable future because of low oil prices in the international market and worsening fiscal trends and capital outlays in the oil producing countries where most of the Pakistani expatriates are employed.
Remittances from Saudi Arabia and the UAE have declined during April, 2016 which is a good example of the close link between international oil prices and the level of remittances from these countries. In fact, Saudi Arabia from where Pakistan receives the highest amount of remittances is already trying its best to substitute its own labour force with foreign workers to offset the negative impact of depressed oil prices on its economy. Pakistan had launched the Pakistan Remittance Initiative (PRI) to enhance the flow of remittances to the country but such initiatives could only yield the desired results if the number and incomes of the expatriates continue to rise. It may also be stated that stagnation in remittances has not come about all of a sudden.
Most of the analysts have been cautioning the government about such an eventuality and urging the authorities to adopt alternative strategies to balance the external sector account. In particular, it is very crucial at this stage to substantially expand exports which have been declining in the recent past. This is not only necessary to compensate for the stagnation in remittances but also to provide a cushion for future foreign payments due on account of rescheduling of earlier debt, issuance of euro bonds, etc, in the not too distant future. Unfortunately, however, government policies seem to be directed to stabilise the exchange rate of the rupee at all costs and borrow from left, right and centre to narrow the external sector deficit and maintain foreign exchange reserves at a certain level. It is high time that the government should do away with this policy approach and concentrate on the expansion of exports to have a sustainable position in the foreign sector.
For such a strategy to be successful, productivity of the economy has to be vastly improved by increasing investment, improving energy supplies, ensuring good governance and last but not least payment of the full amount to exporters withheld by the FBR for the betterment of their liquidity position. At the same time, rupee must be allowed to find its real value in the foreign exchange market to ensure competitiveness of exports. In our view, such measures are needed to be considered for implementation on a fast track basis; failing which the country could face problems like dwindling of reserves, instability in the rupee rate, higher inflationary pressures and tightening of monetary policy.
Source: Business Recorder