Pakistan’s
economy has been tested several times by domestic and global crises. Despite
the global financial crisis, workers’ remittances to Pakistan are increasing by
the year. It has been observed that remittance flows to Pakistan have shown
remarkable resilience as compared to foreign direct investment during and after
the global crisis.
In
the recent past, remittances have become an important source of foreign
exchange inflows into developing countries. Half of the top ten recipients of
remittances in the world are in Asia, including India, China, Philippines,
Bangladesh and Pakistan. Remittance flows to developing countries were $235
billion in 2006, and increased with a growth rate of 22.9% to $289 billion by
2007. They further increased to $338 billion in 2008, with a growth rate of
16.9%.
Remittances
are the second major source of foreign exchange earnings after exports in
Pakistan. In 2009, Pakistan was ranked 12th in the world in terms of overseas
remittance inflows according to World Bank data, but has now risen to 7th
position as of 2012.
If
we look at remittances during the last ten years post 9/11, inflows grew by
each year except in 2004. In 2002, remittances were recorded at $2.3 billion;
more than double of the $1 billion repatriated in 2000. In 2004, overseas
Pakistanis sent only $3.8 billion, as against $4.2 billion in 2003, depicting a
decline of 8.7%. When the democratic government took over, remittances
accounted for $6.5 billion of net inflows in 2008. In fiscal 2012, remittances
reached a record level of more than $13 billion.
The
global economic downturn did not affect remittance inflows to Pakistan. This is
so because the traditional migrant labour destinations in the Middle East,
except the United Arab Emirates, remained largely insulated from the crisis.
According to the Pakistan Economic Survey 2011-2012, workers’ remittances grew
$1.83 billion in fiscal 2012 over the preceding year. In 2012, workers’
remittances to Pakistan of around $13.5 billion accounted for almost 75% of net
current transfers. It can also be observed from Pakistan’s economic history
that remittances have remained stable and countercyclical. Workers send more
money to help their families during crises or natural disasters.
Remittances
have become a backbone for sustainable growth of the Pakistani economy. More
than seven million Pakistanis have been placed abroad since 1971, out of which
approximately 96% of the total is concentrated in six countries in the Middle
East – namely Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Bahrain and
Qatar. About 90% of the total are located in Saudi Arabia, the United Arab
Emirates and Oman alone.
Money
sent home by overseas Pakistanis amounted to $1.3 billion in February 2013,
while remittances reached $9.3 billion in the first eight months of current
fiscal year, with a growth rate of 7.5% over the same period last year. Monthly
average remittances clocked in at $1.2 billion for the period, as compared to
$1.1 billion during the same period of last fiscal year.
Saudi
Arabia continues to be the biggest source of remittances, accounting for nearly
29% of the total during the eight months of the current fiscal year. UAE is the
second major source of remittances to Pakistan, with 20% of the share. Other
major sources of remittances are the USA, the UK and the European Union countries.
The
money sent by migrant labour directly augments the income of the migrant’s
household. The benefits that households derive from remittances depend on how
and where they spend remittances: most are now spending less money on
consumption goods and more on investment goods like education, housing, cars
and other luxuries.
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