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Home remittances to rectify pandemic-suffered economy

The percentage of migrants in total world population hovers around three percent and even that mainly represents low income countries. Visibly their economies are directly benefited in the sense that home remittances form a sizable chunk of their GDPs, sometimes ranging from 6.5% to 13%. It is particularly South Asian countries like Pakistan, Sri Lanka and Nepal where funds inflow from their overseas population earnings proved safety nets against growing poverty. Drastic reduction in percentage (from 35% to 25%) of impoverished population of Pakistan from 2001 to 2019 owes some extent to growing remittances from overseas Pakistanis used at home not only for consumption needs, but also invested for promoting entrepreneurial activity among low and middle income families.

After the incident of 9/11, Pakistani migrants feeling insecure due to strict vigilance of their bank accounts speeded up sending funds and consequently accelerated growth took place since then in volume so and amount of remittances for the current year is expected to touch level nearing $11 billion by 30th June 2021 as country has already achieved level of $9.43 billion, but onslaught of COVID-19 and frequency of economic upheavals in recent years due to other natural calamities, lack of fiscal and monetary discipline aggravating inflationary pressure, absence of good governance, energy crisis and growing militancy both on borders and within the country mitigated the success achieved with regard to poverty reduction during second half of current decade. Further, it is also due to the fact that remittances being received by families do not create any liability or hassle on their part, Hence utilization of these funds both for consumption and productive purposes do not create a sense of discipline and concern for achieving sustained growth of business where these funds have been invested. Besides that it is lack of will and capability on the part of beneficiaries to channelise funds to activities adding to sustained economic growth of the country.

No doubt migrants families are being benefited from funds received from family members working abroad, but at the same time cases have come to light where funds have been illegally channalized through so-called NGOs and seminaries for terrorist activities and money laundering, thus impeding overall socio-economic growth of the country and earning downgrading from Financial Action Task Force (FATF) making a difficult task for government to rectify the position.

No doubt remittances enable recipient families to provide quality education for children and proper health care for the family and also investment in entrepreneurial activities, but in the absence of family head’s guidance and lack of government motivational role positive results are seldom achieved.

Further it is the fact that migrants remit the funds mostly for consumption needs of the family, hence in majority of the cases family members become extravagant and funds are doled out on luxury items. Major chunk of the savings is invested in risky projects like investment in stocks exchange for immediate gain and also in real estate. The recent past crash of stock exchange washed out billions of rupees of overseas Pakistanis. Similarly bubble in prices of real estate due to irrational investment has made it impossible for low and middle income families to own a house.

It is also the fact that low income countries receiving heavy remittances from migrants experience high rate of core as well as food inflations as families receiving funds make irrational spending thus creating imbalance between demand and supply thus not only inflationary condition persists, but also evils like speculative trading and hoarding of essential consumption items flourish thus making life more miserable for impoverished population of the country.

South East Asian countries like Bangladesh and Sri Lanka can boast of their better economic performance among low income countries in the region, which of course is not entirely home remittances led growth. It is their governments who have facilitated the migrants and their families left behind to run tailor-made profitable businesses and investments in exclusively developed saving schemes providing handsome returns to depositors. Similar programs for effective utilization of migrants’ funds need to be undertaken to ensure investment in viable projects at household level and also investment of saved funds in projects augmenting needed infrastructure both in urban and rural areas on public-private ownership basis.

Pakistan government’s initiative to attract remittances by allowing migrants’ families to open Foreign Currency Value Accounts was a viable step in this regard. However to make it more effective State Bank of Pakistan has introduced Roshan Digital accounts for Oversea Pakistanis and their families. Under this scheme deposit certificates carrying handsome return both in terms of Rupee and foreign currency concerned (according to choice of beneficiary) will largely attract migrants’ earnings and at the same time growth sustainability of remittances will further improve. Besides that, digitization of the process of remittances by banks has speeded up the funds transfer to migrants’ families. This will totally eliminate system of Hundi and illegal ways of channelizing overseas Pakistanis funds to their families.

Energy and water scarcity are the major issues, which need to be dealt on priority basis. Apart from successive governments initiatives to develop alternate sources of energy and construction of multipurpose small dams to ensure perennial water supply to farms in rural areas incentives should be provided to migrants’ families in urban areas receiving sizable funds and also communities/groups of families receiving funds in rural areas to become part of the energy generation program. In this regard community power generation program should be undertaken on priority basis with all incentives particularly tax holiday provided to members of the community concerned. Communities setting up small power generation projects particularly solar energy projects and also by setting up small scale sugar mills and making use of sugarcane molasses for producing energy will not only speed up economic growth of their own community/village , but also would have additional monetary gains by providing surplus energy to adjoining areas on commercial basis. Besides that overseas Pakistanis families living in rural and suburbs of big cities need to be motivated to set up rice husking and ginning factories and cold storages and run it for use of entire village/community on commercial basis. This will introduce culture of self reliance in the community and most importantly generate employment opportunities for country’s workforce in the face of large number of people losing work due to COVID pandemic.

Apart from above said tailor-made projects to be introduced for communities and individuals government’s public sector development program also must have main focus on development of infrastructure for speeding up not only economic growth rate, but also for creating employment opportunities for country’s workforce within the country rather than exporting the human capital abroad and relying on their earnings, which under rapidly changing global political and socio-economic environment will not be a perennial source of foreign exchange earnings as majority of manpower importing countries have started relying on their own workforce.

To conclude, while encouraging investment of remittances in community development projects, government should use the local workforce for socio-economic uplift.

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