Remittances play a crucial role in Pakistan’s economy, providing a much-needed inflow of dollars to boost foreign exchange reserves. At $19.3 billion, Pakistan ranks fifth in the world that receives the most remittances every year. India is the largest remittance-receiving country, at an estimated $72 billion, followed by China ($64 billion), the Philippines ($30 billion) and Mexico ($26 billion), according to the World Bank report 2015. Globally, an estimated $574 billion was remitted by migrants to home countries in 2016, down 1% from 2015, when the amount was $581 billion. This is the second drop in global remittances since the global financial crisis of 2007-08. Despite this recent decline, remittances sent by migrants are still about double of what they were a decade ago, before the sharp decline in the global economy during the late 2000s.

Pakistan receives most of its remittances from the Gulf countries, but, within the region, Saudi Arabia and the UAE stand out. According to the Pew Research Center, Saudi Arabia was the leading source of remittance for Pakistan with $5.8 billion being remitted in 2016. Other leading countries were the UAE ($5.7 billion), the UK ($1.7 billion), the US ($1.33 billion), Kuwait ($1 billion), Canada ($565 million), Singapore ($531 million) Qatar ($483 million), Oman ($403 million), Bahrain ($305 million), Spain ($251 million), Italy ($248 million), Germany ($193 million), Australia ($122 million) and Afghanistan ($119 million).

The number of Pakistanis abroad is estimated to be around eight million, constituting over 4% of the total population of the country. According to a research study, the flow of remittances from overseas Pakistanis can be substantially increased through the provision of better banking facilities. No doubt, Pakistani banks in the GCC countries, the UK and USA have been serving the diaspora communities, but their main job has been to work as collection centres for remittances. It has been suggested that they can easily maximize the inflow of remittances if they improve the range of their financial products, including asset management and investment services.

Pakistan received overall remittances of $19.3 billion in fiscal year ended on June 30, 2017, down 3% compared with $19.91 billion in fiscal year 2015-16. Remittances play a major role in stabilising Pakistan’s external sector, as they make up almost half the import bill and cover the deficit in the trade of goods account. However, in recent times, they have come under pressure due to global economic slowdown.  In the given circumstances, the State Bank of Pakistan has been trying to devise ways to increase home remittances. The widening of current account deficit over the past one year-and-a-half has underlined the need to enhance the flow of remittances from abroad. With a view to promoting home remittances through legal channels, the State Bank has now launched “Asaan Remittance Account” scheme for prospective beneficiaries of home remittances. It is believed that this move will facilitate opening of bank accounts by low-risk customers to receive home remittances through proper accounts instead of resorting to traditional cash over the counter transactions.

It may be added here that this initiative has been launched in collaboration with Pakistan Remittance Initiative (PRI) to promote the use of bank accounts by home remittance recipients. Individuals can open these accounts with a simple, one-page account opening form, which is both paper-based and electronic, requiring only basic customer information. Some time back Pakistan had launched the Pakistan Remittance Initiative (PRI) to enhance the flow of remittances and the scheme produced positive results. But of late, the PRI seems to have lost its effectiveness. In view of this, the latest initiative of Asaan Remittance Account has been started.

The new Asaan account is designed only for beneficiaries of home remittances and will be fed with the proceeds of home remittances only. A maximum credit balance limit of Rs2 million, cash withdrawal limit of Rs50,000 per day and fund transfer limit of Rs50,000 per day has been set for these accounts. The prospective recipients and their family members can open bank accounts at banks’ branches or through banks’ permanent staff visiting customers’ places. International Bank Account Number (IBAN) and names of prospective remitter stating relationship with the account holder is a mandatory requirement for the Asaan Remittance Account.
Over 40 percent of Pakistan’s total migrant stock is estimated to be living in richer regions like the US, UK, Europe, and Australia but remittance growth from these countries is slow. PRI needs to increase its penetration in these markets. Recently, the banks have aggressively expanded their networks in Saudi Arabia, UAE, USA and Europe. The State Bank has also allowed the exchange firms to make agreements with 10 international money transfer companies for the handling of remittances.

It is relevant to point out here that remittances are under pressure due to world economic slowdown caused by low oil prices. The end of the global commodity boom has led to tighter budgets in the Gulf, causing a dampening of demand for cheap foreign labour in Saudi Arabia, the United Arab Emirates, and other economies. Given this, Pakistan should expect continued fall in its remittance inflows for the coming days. This calls for urgent attention from the policy makers to deal with the situation.

Looking at the long-term prospects, if we want to ensure that remittances maintain their present level and also increase, there is a need to diversify the markets and the industry categories our workers go to. Construction-related labour exports will likely slow down over the next 5-6 years. What will then matter is quality labour export such as doctors, engineers, para-medical staff, hospitality business experts and other skilled personnel. This aspect calls for urgent attention from the relevant authorities.