Overseas Pakistanis Rescuing Pakistan Economy Yet Again

[Riaz Haq]

Pakistani diaspora sent home $14.2 billion in remittances in July-December 2020, up 25% from the same period in 2019. Pakistanis settled in the United Kingdom and the United States increased their remittances by 52% and 47% respectively in this period, helping Pakistan achieve a record $1.8 billion current account surplus in the first 6 months of the ongoing fiscal year 2020-21. 

Remittances From Pakistani Diaspora. Source: Arif Habib

While Pakistan's exports increased a modest 5.1%, the remittances from overseas Pakistanis jumped a hefty 25% in response to an appeal by Prime Minister Imran Khan who remains very popular among them. He drew nearly 30,000 Pakistani-Americans to a rally during his Washington D.C. visit in 2019. 

Pakistan Trade 1H of FY 2020-21. Source: Arif Habib

Pakistan's imports increased 5.5%, more than the 5.1% increase in exports, during the first half of the current fiscal year 2020-21. This resulted in $12.4 billion trade deficit, a 5.9% increase. Without the 25% jump in remittances, Pakistan would most likely have a current account deficit rather than a surplus in this period. 

The modest 5.1% increase in Pakistan's exports is still commendable in the midst of the global economic devastation caused by COVID19 pandemic. What is even more commendable is the 19% jump in exports in December 2020 over the same month in 2019, indicating a strong upward trend. 

Emigrants From Pakistan 1990-2019. Source: Pakistan Bureau of Emigr...

Pakistani diaspora is the world's 5th largest with more than half a million Pakistanis migrating every year to work overseas. Over 11 million Pakistanis have left home for employment in Europe, America, Middle East and elsewhere since 1971, according to Pakistan Bureau of Emigration. The pace has particularly picked up over the last 10 years.  This phenomenon has helped reduce unemployment in a country where about 2 million young people are entering the job market each year.  It has also helped remittances soar nearly 28X since the year 2000.

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[Riaz Haq]

Despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected. Officially recorded remittance flows to low- and middle-income countries reached $540 billion in 2020, just 1.6 percent below the 2019 total of $548 billion, according to the latest Migration and Development Brief.

https://www.worldbank.org/en/news/press-release/2021/05/12/defying-...

https://www.knomad.org/publication/migration-and-development-brief-34

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Inward remittance flows to South Asia rose by about 5.2 percent in 2020 to $147 billion, driven by surge in flows to Bangladesh and Pakistan. In India, the region’s largest recipient country by far, remittances fell by just 0.2 percent in 2020, with much of the decline due to a 17 percent drop in remittances from the United Arab Emirates, which offset resilient flows from the United States and other host countries. In Pakistan, remittances rose by about 17 percent, with the biggest growth coming from Saudi Arabia followed by the European Union countries and the United Arab Emirates. In Bangladesh, remittances also showed a brisk uptick in 2020 (18.4 percent), and Sri Lanka witnessed remittance growth of 5.8 percent. In contrast, remittances to Nepal fell by about 2 percent, reflecting a 17 percent decline in the first quarter of 2020. For 2021, it is projected that remittances to the region will slow slightly to 3.5 percent due to a moderation of growth in high-income economies and a further expected drop in migration to the GCC countries. Remittance costs: The average cost of sending $200 to the region stood at 4.9 percent in the fourth quarter of 2020, the lowest among all the regions. Some of the lowest-cost corridors, originating in the GCC countries and Singapore, had costs below the SDG target of 3 percent owing to high volumes, competitive markets, and deployment of technology. But costs are well over 10 percent in the highest-cost corridors.

[Riaz Haq]

Remittances in March rise to $2.5bn — highest since August 2022
Analysts attribute monthly increase in the remittances to the Ramadan factor

https://www.thenews.com.pk/latest/1059219-remittances-in-march-rise...

Remittances sent by overseas Pakistani workers, a major source of foreign exchange, rose to a seven-month high of $2.5 billion in March 2023 — an encouraging sign for the cash-strapped country.

The State Bank of Pakistan (SBP), in its monthly bulletin, on Monday stated that the inflow of workers’ remittances was 27% higher compared to the prior month of February; however, it was 11% lower compared to March 2022.

Arif Habib Limited Head of Research Tahir Abbas told TheNews.com.pk that the monthly increase in the remittances is due to the Ramadan factor which usually fetches higher flows due to family commitments, welfare, charity etc.

"The flows in the upcoming months are expected to remain elevated due to another Eid [Eid ul Adha] falling by the end of this fiscal year," he maintained.

Historical trends suggested that overseas Pakistanis sent record-high remittances ahead of Eid festivals every year.

Moreover, inflows remained comparatively high as non-resident Pakistanis used legal channels to send funds to their family members due to the shrinking gap between rates in the interbank and open market.

Samiullah Tariq, head of research at Pakistan-Kuwait Investment Company, termed the increase a “good omen”, elaborating that the difference between the kerb and interbank rates was minimal.

“Remittances number is highest for past seven months; however, this year Ramadan has started earlier which is why remittance inflow increased earlier than last year,” he explained.

The Ministry of Finance has projected that the remittances will “further improve due to positive seasonal and Ramadan factor”.

Meanwhile, the central bank stated that with the cumulative inflow of $20.5 billion during the first nine months of the fiscal year 2022-23, the remittances decreased by 10.8% as compared to the same period last year.

It should also be noted that with remittances widely surpassing the Pakistan Bureau of Statistics (PBS) trade deficit data this month, the possibility of a current account surplus has increased to a great extent.

It should be noted that the SBP trade deficit data point is usually even lower than the PBS trade deficit.

In its monthly outlook report, the Ministry of Finance also mentioned that the current account deficit is likely to remain on the lower side keeping in view the economic factors contributing to the numbers.

Country-wise data
Pakistanis residing in Saudi Arabia remitted the largest amount of $563.9 million in March. However, it was 24.04% lower than the $454.6 million received in February.

Expatriates in the UAE sent home 25.52% more amount as receipts increased from $406.7 million to $324 million.

Remittances from overseas Pakistanis in the UK increased 33.12% to $422 million. They sent $317 million in February.

Moreover, remittances from other Gulf Cooperation Council (GCC) countries decreased by 10.33% to $297.6 million and a 21.72% increase was recorded in inflows from European countries, which clocked in at $298.6 million in the month under review compared to February.

[Riaz Haq]

Country’s brain drain situation accelerated in 2022
Official documents showed more than 765,000 educated youth leave country for employment overseas


https://tribune.com.pk/story/2390704/countrys-brain-drain-situation...

According to the official documents from the Bureau of Emigrants, this year 765,000 young people went abroad. The documents also showed that the number of emigrants had risen after registering a fall in two consecutive years, following 625,000 emigrations in 2019.

According to the documents, those who left the country in 2022, included more than 92,000 graduates, 350,000 trained workers and the same number of untrained labourers went abroad. The documents also showed that 736,000 people went to the Gulf states.

The emigrating educated youth included 5,534 engineers, 18,000 associate electrical engineers, 2,500 doctors, 2,000 computer experts, 6,500 accountants, 2,600 agricultural experts, over 900 teachers, 12,000 computer operators, 1,600 nurses and 21,517 technicians. The group of unskilled workers comprised 213,000 drivers.

According to the data, over 730,000 youth went to the Gulf States, nearly 40,000 went to European and other Asian countries. The country-wise break down of the data showed 470,000 Pakistanis headed to Saudi Arabia for employment, 119,000 to UAE, 77,000 to Oman, 51,634 to Qatar and 2,000 to Kuwait.

Also, according to the official documents, 2,000 Pakistanis went to Iraq, 5,000 to Malaysia, 602 to China, 815 to Japan, and 136 to Turkey. The documents also revealed that 478 Pakistan went to Sudan in Africa in search of employment.

The highest number of people emigrating to a European country was 3,160 youth, going to Romania. It was followed by 2,500 to Great Britain, 677 to Spain, 566 to Germany, 497 to Greece, and 292 to Italy. The Bureau of Emigrants also registered 700 people going to the United States.

More than half of those leaving the country were from Punjab. The documents said 424,000 emigrants this year were from Punjab, 206,000 from Khyber-Pakhtunkhwa plus 38,000 from newly-merged tribal districts, 54,000 from Sindh, 27,000 from Azad Kashmir, 7,000 from Balochistan and 6,000 from Islamabad.

[Riaz Haq]

In 2024, remittance flows to low- and middle-income countries are expected to reach $685 billion, larger than FDI and ODA combined

https://blogs.worldbank.org/en/peoplemove/in-2024--remittance-flows...

Officially recorded remittances to low- and middle-income countries (LMICs) are expected to reach $685 billion in 2024. The true size of remittances, including flows through informal channels, is also believed to be even larger. The growth rate of remittances in 2024 is estimated to be 5.8 percent, significantly higher than 1.2 percent registered in 2023

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The top five recipient countries for remittances in 2024 are India, with an estimated inflow of $129 billion, followed by Mexico ($68 billion), China ($48 billion), the Philippines ($40 billion), and Pakistan ($33 billion) (figure 1). In smaller economies, remittance inflows represent very large shares of gross domestic product (GDP), highlighting the importance of remittances for funding the current account and fiscal shortfalls. Topping the list is Tajikistan (45 percent of GDP), followed by Tonga (38 percent), Nicaragua (27 percent), Lebanon (27 percent), and Samoa (26 percent) (figure 2).
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The recovery of the job markets in the high-income countries of the Organization for Economic Co-operation and Development (OECD), following the onset of the COVID-19 pandemic, has been the key driver of remittances. This is especially true for the United States where the employment of foreign-born workers has recovered steadily and is 11 percent higher than the pre-pandemic level seen in February 2020 (see figure 3). By contrast, the employment level of native-born workers has recovered to the same level as before the pandemic. A similar pattern is seen in the case of Hispanic workers, which is a key factor for the strength of remittance flows to the Latin America and the Caribbean region.

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By region, remittance flows to South Asia is expected to register the highest increase in 2024, at 11.8 percent (figure 4), driven mainly by continued strong flows to India, Pakistan, and Bangladesh. Remittances to the Middle East and Africa is estimated to have increased 5.4 percent, primarily due to rebounded flows to Egypt, compared with a 14.6 percent decline in 2023.

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It is notable that remittances have continued to outpace other types of external financial flows to low- and middle-income countries. Remittances have even surpassed FDI significantly (figure 5). The gap between remittances and FDI is expected to widen further in 2024. During the past decade, remittances increased by 57 percent, while FDI declined by 41 percent. Remittances will likely continue to increase because of enormous migration pressures driven by demographic trends, income gaps, and climate change. Therefore, countries need to take note of the size and resilience of remittances and find ways to leverage these flows for poverty reduction, financing health and education, financial inclusion of households, and improving access to capital markets for state and nonstate enterprises.