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Need of the hour –industry status should be awarded to workers’ remittances

Need of the hour –industry status should be awarded to workers’ remittances

Remittances have remained a big source of foreign currency inflows, which partially help finance foreign expenditure, import payments and debt repayment. While the remittance gap between the formal and informal channel is narrowing, at the same time, the gap between remittances and exports is also narrowing down on our external account. This signifies the importance of remittances and efforts need to be made on part of the government to recognize it as an industry. But focusing on remittances doesn’t mean that we should not address the outstanding structural issues and constraints faced by our exports sector which, in fact, is more important than remittances in many ways, and the present government has already realized this and started taking policy decisions in extending the necessary subsidies to the exporters. However, depreciation alone could not boost exports as other factors such as value addition and diversification could result in increased exports.

The current worker remittances have essentially been consumption-driven. It is assumed that the existing consumption-driven remittances could actually be doubled through the official channels within a period of 2-3 years, if the foreign operations of the large local banks and the relevant government departments/ministries work in close collaboration with each other. A close alliance and working relationship is absolutely critical between different ministries/ departments of the Government of Pakistan (GoP) including Ministry of Finance (MoF), Pakistan Remittance Initiative (PRI), State Bank of Pakistan (SBP), Overseas Pakistani Foundation (OPF), Central Directorate of National Savings (CDNS), Ministry of Labor and Manpower, Foreign Ministry etc.


The central bank has incentivized the transfer of remittances through legal channels, including the proper banking system. Also, the central bank has recently launched an online service, called M-Wallet Scheme, to facilitate instant receipt of remittances via mobile phones in the country.

Moreover, the SBP has allowed authorized dealers (banks) to implement business-to-consumer (B2C) and consumer-to-business (C2B) transactions through foreign correspondent entities under either existing or new home remittance agency arrangements. An individual, in B2C transactions, is allowed to receive up to $1,500 per month for providing freelance and information system services. Service providers other than that of computer and information services are also allowed to receive up to $1,500 per individual per month. Individual pensioners can now also receive up to Rs250,000 per month in remittances.



Meanwhile, in C2B transactions, overseas Pakistanis can directly pay utility bills, fee of the Higher Education Commission-accredited institutions, insurance premium and charges incurred at superstores and on credit cards. Overseas Pakistanis are also allowed to remit funds to purchase residential and commercial houses, plots, flats and buildings from reputed real estate builders/developers and housing societies. However, remittances cannot be sent for equity participation in an enterprise.

As worker remittances remain a key source of balance of payments support, the government has intensified its diplomatic efforts to increase these inflows. To enhance the “consumption-driven” remittances, following ideas could be considered:

  1. Attracting remittances to acquire assets (land, houses, bonds) or set up educational and health facilities for families of workers overseas
  2. Attracting remittances to foster higher and inclusive growth in migrants’ home countries
  3. Strengthening remittances-transfer infrastructure, including the use of new technologies (especially ICT and mobile phones) to channel remittances
  4. Setting-up community centers in the large ethnic Pakistani populated cities including cities in KSA, the UK, the USA, UAE, Oman, Qatar, etc. to primarily target the blue-collar workers.
  5. Rolling-out remitter/investor education program and tapping into the existing NRP community groups/associations and NRP owned restaurants/retail centers to educate the community on the benefits of using banking/ official channels.
  6. GoP/ SBP must encourage opening of smart digital branches of Pakistani banks at the Pakistani dominated/populated areas globally with specific focus of enhancing the NRP remittance flows.
  7. GoP/MoF should seriously consider offering tax Breaks/fiscal incentives to the banks on the income earned through the incremental remittances.
  8. Launching of diaspora bonds and introduction of remittance based financial products for overseas Pakistanis (Pakistan Banao Certificates and “Panda Bonds” have recently been launched).

It is a time we, the remittance dependent countries, realize that the time has come for us to look at alternative methods for increasing direct foreign exchange coming in from the Pakistani diaspora. If intelligent steps are put into play today, we would easily be able to counter the current account deficit and make up for it — much more than we had envisioned.

[box type=”note” align=”” class=”” width=””]The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan[/box]

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