Where are the remittances of the Pakistani diaspora being spent?

Where should the remittances sent by the Pakistani diaspora be invested? Well, the prevalent assumption is that the major chunk of this wherewithal penetrates into the real estate sector rather than agriculture, domestic bonds, energy sector, infrastructure, local manufacturing of the imported constituents for the exportable products, domestic savings or SMEs,

Pakistan received $29.4billion remittances during the preceding fiscal year which was a record and helped in addressing the economic woes of the country in trying times. The momentum has maintained and the Pakistani diaspora have remitted $8 billion during the first quarter of the current fiscal year which is the only good news on the economic front, to be precise.

The recent over 10% depreciation of the local currency caused jitters in the economy when the greenback hit a new record trading at Rs.175 on October 27, 2021. It was a déjà vu of August 2020 when dollar traded for Rs.168 in the wake of the flight of the hot money, so to speak. In the wake of Covid19 in March 2020, the so-called foreign investment or hot money amounting to $3.5billion in domestic bonds flew back to its origin within a couple of months causing perturbation and wreaking havoc in the currency market. How much amount has been invested by the Pakistani diaspora in the domestic bonds ever since the government allowed foreign investment in domestic bonds in July 2019? Are the Pakistani diaspora enamored with the domestic bonds where the returns of investment are rather lucrative?

Are the Pakistani diaspora keen to establish businesses in Pakistan with the remittances sent by them so that employment opportunities may be created and the underlying poverty may be tackled? The total number of registered companies in Pakistan are around 1,52,000 which may spike if the overseas Pakistanis establish their businesses in Pakistan. The Pakistani diaspora may get benefit in case they establish entities with their hard-earned wherewithal.

Pakistan needs dollars. It may be through remittances or foreign direct investment. FDI is generally considered the best source of foreign exchange as it creates jobs without increasing the debt burden. The situation of FDI is quite abysmal for preceding five years, to be precise. It was during the last three years of the Gen Musharraf era when our country attracted $15billion in foreign direct investment. The FDI has not touched $2.5billion in the last three years of the incumbent government. Remittances of the overseas Pakistanis need to make their way into industry for a sustainable growth. Investment in Small and Medium Enterprises could bring about humongous benefits in terms of sustainability. There are over 3.3 million SMEs comprising service providers, manufacturing units and start-ups. SMEs play a crucial role with its share of 30% in GDP and a monumental source of employment.

Remittances may be invested in the agrarian sector of the economy in order to get rid of $4 billion of food deficit per annum and import of basic commodities.

It is being claimed that we need about $20 billion to make debt repayments in the current fiscal year. This issue along with the issues of trade and current account deficits could be addressed with prudent strategies and ensuring that the Pakistani diaspora do invest in the productive sectors of the economy resulting in enduring economic prosperity.

We have become a consumption-oriented nation. Our savings have diminished owing to our extravagant living standards. This is a cause of concern as well. How much wherewithal received through remittances goes into saving. According to the SBP’s 2019-20 annual report net domestic savings in June 2020, stood at 6.8% of GDP vis-à-vis 7.8% of GDP in 2016. Over $2 billion received through Roshan Digital Account indicate that through awareness programs, remittances sent by the overseas Pakistanis could be channelized in the most prudent way.

The paradox at the moment is that the entire government machinery is focused on the efforts of getting the 39-month $6 billion July 2019 EFF of IMF revived instead of fixing the sluggish economy with the endeavors of the Pakistani diaspora who are quite vital for the economic prosperity at this juncture.

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