Malik Nasir Mahmood Aslam describes an important
Remittances going down Pakistani revenues depend to a large extent on remittances sent from abroad and successive Pakistani governments have become used to utilising such amounts as regular chunks of their income portfolios and prepare their budgets accordingly. Pakistan’s reliance on remittances for its foreign exchange has been increasing each year, despite record inflows and record exports in the current financial year. On the other hand, the import bill for the current financial year for goods and services was about $84 billion that has resulted in a large trade gap and has also created a current account deficit of $17.4 billion. However, this large amount of remittances estimated at about $31 billion in the current year could not bridge the trade gap, resulting in the huge current account deficit. The financial managers slashed imports to bring a balance in trade and control the damage on the external front of the economy by minimising the current account deficit.
To make matters more difficult the remittances have shown a clear trend of declining and in the three months period of July to October they fell to $9.9 billion, down 8.6 per cent from $10.8 billion in July-October last year. If the declining trend continues, total remittances in 2023 ending in June, would remain close to $30 billion, lower than the $31 billion that came in 2022. The obvious problem faced by this decline would be the impending failure to keep the current account deficit somewhere around $10 billion in 2023, more so if stagnant exports do not grow much in the remaining eight months of the fiscal year. This is a difficult prospect to face and may make matters more cumbersome for the current finance managers of the coalition government.
It is reported that remittances from Saudi Arabia, UAE, UK and US make up 68.5 per cent of Pakistan’s yearly remittances but lately remittances from there constituting 57.7 per cent of the total share have witnessed a decline and it is forecast that there is scant chance of a reversal of this trend primarily due to economic and expatriate labour market conditions of host countries. The result is that the overseas Pakistanis working in Saudi Arabia, UAE and UK are sending less foreign exchange back home and this amount is less than last year. During July-October this year, remittances from these countries fell by 11.7 per cent, 9.2 per cent and 8.3 per cent, respectively.
The number of overseas Pakistanis in Saudi Arabia is decreasing because expatriate workers from other countries, including India, are outnumbering Pakistanis in professional/managerial jobs. Besides, the growing Saudisation of the labour market and growth in opportunities for overseas workers to set up small businesses in Saudi Arabia has also influenced the volume of foreign exchange sent back home and Pakistan is no exception.
Same is the condition with the remittances coming to Pakistan from the UAE with varying degrees of intensity and they have also decreased. The UAE is a global financial and trading hub that offers greater opportunities for expatriate workers to use earnings to invest in UAE-based businesses. With the passage of time such opportunities became more attractive for overseas Pakistanis particularly in the wake of consistent political uncertainty back home. On the contrary, they come across a growing number of resident Pakistanis who continue to invest in the UAE’s real estate and retail sectors.
The result is a 9.2 per cent fall in remittances from the UAE from $2.08 billion in July-Oct 2021 to $1.89 billion in July-Oct 2022 that can also be explained by a sharp decline in the number of Pakistani workers going there during the past two years. In 2020 and 2021, only 81,118 went on a work visa to the UAE, mainly because of Covid-19-related travel restrictions against 211,270 in 2019 alone. Between January and October this year, 108,573 Pakistanis went there for work. By the end of the year, this number could rise to 130,000 or so, but that too would be far below what it was in 2019 — and even earlier.
Saudi Arabia’s case is not different. The decline in remittances from the kingdom: from $2.785 billion in July-Oct 2021 to $2.459 billion in July-Oct 2022 can be partly explained in the context of labour export. In the last two years, 292,153 Pakistanis went on a work visa to Saudi Arabia; in 2019 alone, 332,764 workers went there. The number is growing rapidly; 429,649 in 10 months of 2022 but larger export of workforce takes time to translate into larger remittances. Remittances from Saudi Arabia may start growing sometime in the middle of 2023 or early 2024.
During July-October 2022, remittances from the UK slipped to $1.368 billion from more than $14.92 billion during July-October 2021 but the reasons for this decline are different as the UK is facing 41-year high consumer inflation; 11.1 per cent in October and 45-year high food inflation 16.4 per cent in October. This has eroded the savings of people including expatriates with decline in remittances. Besides, the UK economy has already contracted 0.2 per cent in the July-September quarter and the Bank of England fears that this downturn could last deep into 2024. Dwindling remittances from there is a direct reflection of this fact. TW