Why Pakistanis need to send more money

In spite of the global business slowdown, overseas Pakistanis sent home close to $20 billion in FY-2017, banking data indicates.

But a more conservative government estimate put the inflow at around $19.5 billion in the same period.

However, in order to raise the overall inflow, the State Bank of Pakistan (SBP) is projecting the amount to move faster and go beyond $20 billion in the months ahead. "We are hoping and praying that the economic situation, particularly in the Middle East and the GCC region, bounces back in FY-2018, employing more Pakistani workers and ensuring higher inflow of remittances to help our current projection come true," an SBP spokesman told Khaleej Times.

The government also says that "after international oil prices improve, it will help the oil-based economies into a more comfortable situation to resume and carry on their development and programmes, and employ an increasing number of Pakistani workers," a spokesman for the Ministry of Commerce said.

The Pakistan Bureau of Statistics puts the FY-2017 inflow of remittances at $19.303 billion, which is 3.3 per cent lower than FY-2016, when the amount was $19.91 billion. It has brought several government ministries - including finance, overseas Pakistanis and commerce - to think ways and means to help overseas Pakistanis send a higher amount of remittances. While the credit goes to less than three million Overseas Pakistani workers, particularly those employed in the UAE, to send home larger amounts of remittances, the irony is that the rest of the entire home-based Pakistani manpower in this nation of 200 million has together been able to export $20 billion worth of goods annually for the last four years.

While this has been the state of home remittances, Pakistan is also beset with the problem of the value of its rupee. There is persistent demand, especially by exporters, who claim the rupee is overvalued by 10 per cent against the US dollar. The high tariff on energy and high cost of doing business in Pakistan plus the over-valued rupee, they claim, are the reasons that they are facing a tough competition from exporters of other countries. This they claim is the reason for the overall export figure of Pakistan stagnating at around $20 billion for the last four years.

There is disagreement as to how for the rupee is overvalued, but even the International Monetary Fund also says that the rupee is overvalued.

These demands and reasoning apart, the government of outgoing Prime Minister Nawaz Sharif did not allow lowering the value of the rupee against the greenback. Finance Minister Ishaq Dar, who will continue in his role in incoming Prime Minister Khaqan Abassi's cabinet, has been a strong opponent of any devaluation. This is the government stand even now.

The currency was down to Rs109 to a dollar in the open market last month, in the wake of moves for removal of Sharif, while the dollar was also inching up in the inter-bank market.

Dar then asked the SBP to intervene. As a result of the SBP intervention, and after it poured an undisclosed amount of dollars in the market, the currency looked up. But it is still quoted at around Rs107.50 to a dollar in the open market, and Rs105.80 in the inter-bank market. What does the future hold for overseas Pakistanis and others and what exchange rate will they get?

"The dollar trades flat, both in the inter-bank, as well as in the open markets as both markets remain dull," the analysts said.

In a forex-related development, the SBP has directed all commercial banks "to take extra measures to minimise money laundering through banking channels". It said: "The banks should implement an in-house system to detect differences between the value declared in foreign trade documents and prevailing market prices. In addition, banks need to set out escalation procedures to manage transactions where significant differences in prices are identified. The money laundering method was also being used for funding terrorists in [certain countries]," an official said.

Government sources said "we are helping overseas Pakistanis to send larger amounts of their remittances, and we are plannng to introduce more steps to help them."

The writer is based in Islamabad. Views expressed are his own and do not reflect the newspaper's policy.

Source: Khaleej Times