The Pakistan Industrial and Traders Associations Front (PIAF) has suggested the government to announce incentives for oversees Pakistanis to further boost up foreign remittances, besides enhancing investment in the country by Pakistani expatriates.
Chairman PIAF Faheemur Rehman Saigol said that remittances last month came in at $2.21 billion and this figure, while an improvement from last month’s $2.09 billion, was significantly lower than market expectations of $2.4-2.5 billion. However, on a month-on-month basis, remittances rose by 5.3% but they declined by 11.24% compared to last year, when remittances stood at $2.49 billion.
He said that the market was expecting remittances to improve following a massive crackdown on exchange rate manipulation in the open market, and the subsequent reduction in the premium between the open and interbank markets.
The PIAF Chairman said that Pakistanis abroad may choose to send remittances through banks, in which case they would become part of the interbank market, or exchange companies, which are part of the open market. Typically, the difference in the rates of the two markets was not very large; under the agreement with the International Monetary Fund (IMF), it cannot exceed 1.25% for more than five days.
However, between August 28 and September 4, the difference in the market rates widened to an alarming extent both in absolute and percentage terms — up to nearly Rs 30 per dollar or 8.5%. And before the crackdown was launched in early September, a significant number of foreign exchange dealings, including remittances, were either being done ‘off the books’ in the open market or diverted to the grey market. It all changed, however, once the authorities launched a massive crackdown on illegal foreign exchange trade.
Faheem Saigol said that Pakistan’s economic growth is expected to see a decline during next two years.
So, foreign remittance flows are the only hope which can support the current account balance, as the GDP growth is not going to decelerate. Lamenting the gloomy picture of Pakistan’s position in the region with regard to its GDP growth, he said that upward trend in remittances to Pakistan from overseas workers is a positive news for the country’s economy.
