Role of re­mit­tances

The Pak Banker - - FRONT PAGE -

Re­mit­tances play a cru­cial role in Pak­istan's econ­omy, pro­vid­ing a much-needed in­flow of dol­lars to boost for­eign ex­change re­serves. At $19.3 bil­lion, Pak­istan ranks fifth in the world that re­ceives the most re­mit­tances ev­ery year. In­dia is the largest re­mit­tance-re­ceiv­ing coun­try, at an es­ti­mated $72 bil­lion, fol­lowed by China ($64 bil­lion), the Philip­pines ($30 bil­lion) and Mex­ico ($26 bil­lion), ac­cord­ing to the World Bank re­port 2015. Glob­ally, an es­ti­mated $574 bil­lion was re­mit­ted by mi­grants to home coun­tries in 2016, down 1% from 2015, when the amount was $581 bil­lion. This is the sec­ond drop in global re­mit­tances since the global fi­nan­cial cri­sis of 2007-08. De­spite this re­cent de­cline, re­mit­tances sent by mi­grants are still about dou­ble of what they were a decade ago, be­fore the sharp de­cline in the global econ­omy dur­ing the late 2000s.

Pak­istan re­ceives most of its re­mit­tances from the Gulf coun­tries, but, within the re­gion, Saudi Ara­bia and the UAE stand out. Ac­cord­ing to Pew Re­search Cen­ter, Saudi Ara­bia was the lead­ing source of re­mit­tance for Pak­istan with $5.8 bil­lion be­ing re­mit­ted in 2016. Other lead­ing coun­tries were the UAE ($5.7 bil­lion), the UK ($1.7 bil­lion), the US ($1.33 bil­lion), Kuwait ($1 bil­lion), Canada ($565 mil­lion), Sin­ga­pore ($531 mil­lion) Qatar ($483 mil­lion), Oman ($403 mil­lion), Bahrain ($305 mil­lion), Spain ($251 mil­lion), Italy ($248 mil­lion), Ger­many ($193 mil­lion), Aus­tralia ($122 mil­lion) and Afghanistan ($119 mil­lion).

Pak­istan re­ceived over­all re­mit­tances of $19.3 bil­lion in fis­cal year ended on June 30, 2017, down 3% com­pared with $19.91 bil­lion in fis­cal year 2015-16. Re­mit­tances play a ma­jor role in sta­bil­is­ing Pak­istan's ex­ter­nal sec­tor, as they make up al­most half the im­port bill and cover the deficit in the trade of goods ac­count. How­ever, in re­cent times, they have come un­der pres­sure due to global eco­nomic slow­down on the back of low crude oil prices. In the given cir­cum­stances, the State Bank of Pak­istan has been try­ing to de­vise ways to in­crease home re­mit­tances. The widen­ing of cur­rent ac­count deficit over the past one year and a half has un­der­lined the need to en­hance the flow of re­mit­tances from abroad. With a view to pro­mot­ing home re­mit­tances through le­gal chan­nels, the State Bank has now launched 'Asaan Re­mit­tance Ac­count' scheme for prospec­tive ben­e­fi­cia­ries of home re­mit­tances. It is be­lieved that this move will fa­cil­i­tate open­ing of bank ac­counts by low-risk cus­tomers to re­ceive home re­mit­tances through proper ac­counts in­stead of re­sort­ing to tra­di­tional cash over the counter trans­ac­tions.

It may be added here that this ini­tia­tive has been launched in col­lab­o­ra­tion with Pak­istan Re­mit­tance Ini­tia­tive (PRI) to pro­mote the use of bank ac­counts by home re­mit­tance re­cip­i­ents. In­di­vid­u­als can open these ac­counts with a sim­ple, one-page ac­count open­ing form, which is both pa­per-based and elec­tronic, re­quir­ing only ba­sic cus­tomer in­for­ma­tion. The ac­count is de­signed only for ben­e­fi­cia­ries of home re­mit­tances and will be fed with the pro­ceeds of home re­mit­tances only. A max­i­mum credit bal­ance limit of Rs 2 mil­lion, cash with­drawal limit of Rs 50,000 per day and fund trans­fer limit of Rs 50,000 per day has been set for these ac­counts. The prospec­tive re­cip­i­ents and their fam­ily mem­bers can open bank ac­counts at banks' branches or through banks' per­ma­nent staff vis­it­ing cus­tomers' places. In­ter­na­tional Bank Ac­count Num­ber (IBAN) and names of prospec­tive re­mit­ter stat­ing re­la­tion­ship with the ac­count holder is a manda­tory re­quire­ment for the 'Asaan Re­mit­tance Ac­count'.

Of late, the PRI seems to have lost its ef­fec­tive­ness. In view f this, the lat­est ini­tia­tive of ' Asaan Re­mit­tance Ac­count' has been started. Ob­vi­ously, if the ben­e­fi­cia­ries are con­vinced about the con­ve­nience of such an ac­count, more trans­ac­tions would be chan­nel­ized through the bank­ing sys­tem and the amount of home re­mit­tances would in­crease to sup­port the ex­ter­nal sec­tor po­si­tion of the coun­try.

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