Pakistan Muslim League Nawaz had promised in its 2013 manifesto that upon coming to power, it would convert at least 50 per cent of the remittances by overseas Pakistanis into investments.
Home remittances have dropped significantly over the past year. In February 2017, remittances fell by 7 per cent. For the first eight months of 2016-17, the decline had been 2 per cent. From 2010-2015, Pakistan was receiving the highest remittances among Asian countries with an annual growth rate of 14 per cent, followed by 11 per cent in Sri Lanka, 7 per cent in Bangladesh and 5 per cent in India.
Overseas Pakistani workers remitted $19.91 billion in 2015-16, showing a growth of 6.38 per cent compared with $18.72 billion received in the preceding fiscal year.
According to State Bank of Pakistan (SBP), the overseas Pakistanis sent $17.46 billion in the first eleven months (July – May 2016/2017) as compared with $17.84 billion during the same period in the last fiscal year.
Within Pakistan, Punjab receives 62 per cent of the foreign remittance, and Khyber Pakhtunkhwa gets 28 per cent. The flow of remittances into Karachi has been small due to the migration of skilled and professional workers along with their families.
The future of remittances in Pakistan holds little promise, given the political and financial upheaval impacting the Middle Eastern countries. Due to a decline in oil prices, Saudi Arabia’s oil income has suffered a 47 per cent drop, resulting in a 1 per cent decline in its GDP during 2016. Many workers had already left SA due to financial constraints.
Remittances have also decreased from the UK and USA and other European countries.
Since 2009, the World Bank has acknowledged the importance of remittances by including them in its measure of creditworthiness allowing the countries with high remittances to borrow more money than they otherwise could.
Remittances provide the receiving country with the needed foreign exchange that helps the developing countries alleviate the balance-of-payment and debt crises.
Remittances increase the household income of the recipients that help countries reduce poverty in the long run. Remittances also enable people to have a quality education, a rare commodity in a developing country where the public sector education system is often a neglected. Investment is another area where remittances make a difference. Money remitted home is usually reinvested in either real estate or other areas having multiple effects on the overall economy. Entrepreneurship gets a boost as the flow of money provides an opportunity for opening up new businesses.
Truth Tracker talked to the Special Assistant to Prime Minister on Revenue, Senator Haroon Akhtar, about the promise PML-N made about converting 50 per cent of remittances into investment. Akhtar seemed oblivious to the promise and said that the government had no such policy in place. He agreed that over the years remittances have decreased, but he laid the responsibility of this decline on the financial situation abroad and the reduction in overseas Pakistani workers.
Another reason cited for the falling remittances by the advisor was the Anti-money Laundering Act 2010, which he said had discouraged the practice of whitening black money by remitting the money back home.
“To help people remit their money through legal sources, the government of Pakistan has given different incentives to banks.” Pakistan Tehreek e Insaf Vice Chairman, Shah Mehmood Qureshi, told Truth Tracker that the government had no clear policy concerning overseas Pakistanis, which he said had also affected the flow of remittances. “The effect of reduced remittances could be seen on the trade deficit, which has already risen to an alarming level,” he said. “Our trade deficit is in terrible shape and in the absence of FDI, remittances could save Pakistan from plunging into financial crises,” he added. “In case remittances continue to fall even further, we would have to borrow more to retire debt and pay for the import bills,” he explained. Qureshi said that the economic situation of Pakistan was bleak and there was a general disgruntlement in the business and trading community.
When Truth Tacker contacted Senator and Chairman Standing Committee on Finance and Revenue, Saleem Mandviwalla from PPP, to seek his viewpoint regarding the government’s desire to convert 50 per cent of remittances in investment, he said that this could only be done when the government was left with any money after meeting its existing demand of payment of debts and import bills. “Exports and remittances reflect the financial health of an economy; unfortunately, both are in bad shape.” Criticizing the government on its wrong economic policies and misplaced priorities, Mandviwalla said that export was not a part of the government’s focus. He further added that Pakistan’s economy had become import-based. “Aside from remittances, we had no alternative to earn foreign exchange. The FDI was in similar decline,” he argued. Talking about economic indicators, Mandviwalla said that the analysis of four areas of an economy was enough to understand where the country was heading. “These were: Export, manufacturing, employment, and agriculture. All these sectors had posted negative growth over many years,” he said. “That explains the condition of Pakistan’s economy.”
Dr. Qais Aslam, Professor of Economics, University of Central Punjab, Lahore, said that he had not heard about any such policy initiative from the government. However, Aslam said that remittances are very crucial for Pakistan. “The increased trade deficit in recent months, from $ 20.3 billion to 3.00 billion was due to falling remittances.”
Talking about the solution to the predicament, Aslam said that Pakistan could use its youth bulge to its advantage. “Why not train young people on different skills needed abroad? This would bring more foreign exchange to the country in the form of remittances,” he explained. According to Aslam: “This policy of exporting skilled labour would also solve the problem of unemployment amongst the youth.”
Unfortunately, the government was only focused on providing benefits to the urban rich class that constitutes six per cent of the population. “All tax incentives and rebates are given to this class only, while the rest of the population has been trapped in an economic and financial crisis generated by none other than the government itself,” Aslam said.
In light of the views and facts presented by the lawmakers and independent analysts, PML-N has failed to honour its promise of converting 50 per cent of the remittances into investment.