Meanwhile, Pakistan's exports have declined from 13.5% of GDP in year 2000 to 8.24% of GDP in 2017. At the same time, the country's import bill has increased from 14.69% in year 2000 to 17.55% of GDP in 2017. This growing trade imbalance has forced Pakistan to seek IMF bailouts four times since the year 2000. It is further complicated by external debt service cost of over $6 billion (about 2% of GDP) in 2017. Foreign investment in the country has declined from a peak of $5.59 billion (about 4% of GDP) in 2007 to a mere $2.82 billion (less than 1% of GDP) in 2017. While the current account imbalance situation is bad, it would be far worse if Pakistani diaspora did not come to the rescue.
Diaspora Remittances:
Estimated inflows of $20.9 billion make Pakistan the world's 7th largest recipient of remittances for 2018, according data released by the World Bank in its latest "Migration and Remittances" report of December 2018. In South Asia region, Pakistan is the second largest recipient of remittances of $20.9 billion after top-ranked India's $79.5 billion.
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| Pakistan Remittances in Millions of US Dollars. Source: World Bank |
Remittances from Pakistani diaspora have grown nearly 21-fold since the year 2000. Pakistanis sent home remittances adding up to 6.9% of the country's GDP in 2018, up from 1% back in year 2000.
Pakistan's Trade:
In 2017, Pakistan exported goods and services worth $22 billion while it imports amounted to $57 billion, a trade deficit of $35 billion for the year. This is a dramatic deterioration from about $2 billion trade deficit (2% of GDP) in year 2000 to $35 billion trade deficit (about 12 % of GDP) in year 2017.
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| Pakistan Trade Deficit in Billions of US$. Source: World Bank |
Pakistan's exports have declined from 13.5% of GDP in year 2000 to 8.24% of GDP in 2017. At the same time, the country's import bill has increased from 14.69% in year 2000 to 17.55% of GDP in 2017.
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| Pakistan FDI. Source: The Global Economy |
Foreign Direct Investment:
Foreign direct investment (FDI) in Pakistan was a mere $2.82 billion (less than 1% of GDP) in 2017, down from a peak of $5.59 billion (4% of GDP) in 2007. The lack of foreign investment has contributed to the country's dwindling reserves and balance of payments difficulties requiring it to seek yet another IMF bailout.
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| Pakistan's External Debt. Source: State Bank of Pakistan via Dr. Ishrat Husain |
Pakistan's Debt:
Significant growth in remittances from Pakistani diaspora has clearly helped but the external accounts gap is too big for it. This has forced Pakistan to borrow heavily in recent years. It has raised debt service costs and put pressure on Pakistan's reserves.
Summary:
Remittances from Pakistani diaspora have jumped 21-fold from about $1 billion in year 2000 to $21 billion in 2018, according to the World Bank. In terms of GDP, these inflows have soared nearly 7X from about 1% in year 2000 to 6.9% of GDP in 2018. Meanwhile, Pakistan's exports have declined from 13.5% of GDP in year 2000 to 8.24% of GDP in 2017. Foreign investment in the country has declined from a peak of $5.59 billion (about 4% of GDP) in 2007 to a mere $2.82 billion (less than 1% of GDP) in 2017. At the same time, the country's import bill has increased from 14.69% in year 2000 to 17.55% of GDP in 2017. This growing trade imbalance has forced Pakistan to seek IMF bailouts four times since the year 2000. It is further complicated by external debt service cost of over $6 billion (about 2% of GDP) in 2017. While the current account imbalance situation is bad, it would be far worse if Pakistani diaspora did not come to the rescue.
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29 comments:
With this kind of trade deficit, I have wondered why the government has not imposed restrictions or at least curtail non-essential goods, such as automobiles, cosmetics, electronics goods, etc. one or two year restrain can go a long way in cutting down the trade deficit.
Apparently, the Malaysians pointed out to Imran that halal meat was a multi billion dollar export business worldwide but Pakistan was not a player in this market. So the PTI government is planning to take a plunge in this area and see if they can start exporting halal meat.
They keep focusing on the traditional areas of clothing, sporting goods, etc but they need to start focusing on creating new markets with new products.
Sikandar/Abid:
I think they need to do both: cut non-essential imports and diversify/grow exports.
Livestock, meat and poultry exports into the huge halal market is a great idea. Argentina and Brazil have built their economies on such exports.
At the same time, Pakistan needs to focus on high value added exports such as IT and aviation.
Pakistan's high tech exports last year surged past a billion US$ and growing at double digit rates.
https://www.riazhaq.com/2018/08/state-bank-pakistan-it-exports-surge-to.html
And over a dozen countries are now buying and deploying Pakistan made Mushshak trainer airplanes based on Cessna design.
https://www.riazhaq.com/2016/12/pakistan-made-airplanes-lead-nations.html
#Pakistan to focus on #engineering sector #exports.#ImranKhanPM advisor Razzak Dawood invited #Japanese companies to look into the information and #technology, small and medium enterprises and #agriculture value-chain sectors for #investments. https://www.thenews.com.pk/print/404268-pakistan-focuses-on-engineering-sector-exports
Adviser to the Prime Minister on Commerce Abdul Razak Dawood on Monday said Pakistan graduated from its traditional textile and leather sectors to export of engineering goods, while inviting Japanese companies to benefit from the country’s geographical connectivity to Asian markets.
Dawood, while addressing a seminar on Pakistan’s Economic Policy, invited representatives of Japanese companies to look into the information and technology, small and medium enterprises and agriculture value-chain sectors for investment.
“Advisor underlined that Pakistan had graduated from its traditional sectors of textile and leather to the export of engineering goods,” an official statement quoted him as saying.
“He (the advisor) called for taking advantage of Pakistan’s strategic location for exports to the Middle East, Africa and Central Asia.”
Japan External Trade Organization (Jetro) and Ministry of Economy, Trade and Industry of Japan, Ministry of Commerce and Textiles and the Embassy of Pakistan in Japan jointly organised the seminar. Around 200 participants primarily from the Japanese business community attended the event.
Adviser to the Prime Minister on Commerce underscored the importance of furthering trade and investment relations between Japan and Pakistan, while highlighting growing potential of the local market, vibrant demography, low productivity costs, availability of rich natural resources and a liberal investment regime.
“Out of all the G-7 countries, Pakistan has a longstanding trade and investment relationship with Japan and there is a need to build upon the reserve of historical linkages, goodwill, understanding and respect for brand Japan in Pakistan,” Dawood said.
The advisor said the balance sheets of multinational corporations in the country reflect that they are making profits. He invited Japanese businesses to explore huge opportunities in trade and investment in the country. He also highlighted massive investment in infrastructure projects with the potential to make the country a regional hub for trade and investment.
There are 86 Japanese companies operating in the country with some enhancing their investments while new ones entering the local market. A recent annual survey of the Jetro ranked Pakistan as the first in terms of business growth expectation, profitability and local employment.
The remittances are a double edged sword. Without the cushion afforded by high remittances the government could not have kept the exchange rate so overvalued, and imports would not have soared so much while exports would have grown with a cheaper currency. The overvalued rupee crippled Pakistan's export sector for the last decade, a monumentally stupid act by the PPP and PMLN governments. Exports were rising sharply in the Musharraf years and then stagnated. An overvalued rupee allows Pakistanis to buy foreign goods at bargain prices, so politically there is pressure to maintain that, but in the end, market forces will assert themselves as they have finally done. The drop in the PKR from 100 to 140 per USD is going to markedly stimulate exports while restraining imports as they are now much more expensive. I expect the trade deficit and current account to decline sharply in the next 12 months. The key for the government is to keep the PKR undervalued on a long term basis, that will stimulate the development of export industries while supressing imports.
Good news for investors to be announced shortly. Shanghai stock exchange and Karachi stock exchange have agreed for near real-time sharing of market data. Investors on both bourses can diversify investments. All buy and sell transactions can be done in both Pak Rupee and RenMinBi. Chinese Central bank and SBP will have electronic gross settlements enabled. We can expect a barrage of investments soon from our brothers.
#UAE plans to deposit $3 billion in #Pakistan's central bank "in the next few days", the UAE state news agency WAM reported on Friday, while a Pakistani official said #Islamabad also hopes it will allow deferred payments for #oil supplies. #IMF #economy
http://www.arabnews.com/node/1423831#.XB0L2ByGdkA.twitter
Pakistan is battling to bring under control a gaping current account deficit that's wobbled its economy and lowered growth.
Islamabad is engaged in bailout talks with the International Monetary Fund (IMF) but has also sought financial help from allies China and Saudi Arabia.
The UAE deposit is aimed at supporting Pakistan's monetary policy, WAM said, citing the state-run Abu Dhabi Fund for Development.
Hours after the WAM announcement, Pakistani Information Minister Fawad Chaudhry told Reuters that Islamabad was "also hoping to get deferment for oil payments" from UAE.
Chaudhry declined to disclose the sum of assistance sought through deferred payments, but said this was part of the discussions that led to the UAE announcing it would deposit $3 billion with Pakistan's central bank.
The minister added that the UAE planned to make investments in Pakistan, including a refinery and desalination plants.
In October, Saudi Arabia said it would loan Pakistan $6 billion, including a $3 billion deposit for its foreign currency reserves and another $3 billion in deferred oil payments.
China, Pakistan's staunchest ally and financial benefactor, has also pledged to help but has not announced the size of any assistance package.
The United Arab Emirates has announced its intention to deposit US$3 billion (equivalent to AED11 billion) in the State Bank of Pakistan "to support the financial and monetary policy of the country", reported WAM, the official news agency of the Emirates.
https://www.dawn.com/news/1452799
The Abu Dhabi Fund for Development said, in a statement today, that it will deposit the said amount in the coming days to enhance liquidity and monetary reserves of foreign currency at the bank.
The country's support for Pakistan's fiscal policy is based on the historical ties between the two people, said WAM, and the two friendly countries and the desire to further develop the bilateral cooperation in all fields.
Following the announcement, Prime Minister Imran Khan took to Twitter to thank the UAE government for "supporting Pakistan so generously in our testing times".
"This reflects our commitment and friendship that has remained steadfast over the years," said the prime minister.
The Abu Dhabi Fund for Development has financed eight development projects in Pakistan with a total value of AED1.5 billion, including AED931 million in grants, added WAM. The funds covered projects in sectors such as energy, health, education and roads.
Pak-UAE ties
The PTI-led government, which completed its 100 days in power on November 26, counted "resetting relations with key partners including Saudi Arabia and the UAE" among its accomplishments in its performance report.
Since assuming office in August, the premier has visited the UAE twice.
The first visit took place in September when Khan visited Saudi Arabia and then the UAE. He was received by Crown Prince of Abu Dhabi Sheikh Mohammed bin Zayed bin Sultan Al Nahyan and the two countries had agreed to strengthen economic, trade and investment relations.
The next month, a UAE delegation — comprising CEOs/senior officials of major companies including Mubadala Petroleum, ADIA (Sovereign Wealth Funds), Etisalat, DP World, Dubai Investment Authority, Emaar Properties, Aldahra Agriculture and Abu Dhabi Fund for Development — arrived in Pakistan.
According to Foreign Minister Shah Mahmood Qureshi, the one-day visit of the delegation — headed by Dr Sultan Aljaber, minister of state and CEO of Abu Dhabi National Oil Company — was a follow-up to the prime minister’s maiden visit to Abu Dhabi.
In November, the premier embarked on his second trip to the UAE amid reports that the gulf state was ready to extend financial assistance to Pakistan. Khan was received by the Abu Dhabi crown prince in the UAE capital and was accorded a reception at the presidential palace, which was followed by delegation-level talks.
He was accompanied by a high-level delegation comprising Foreign Minister Qureshi, Finance Minister Asad Umar, Petroleum Minister Ghulam Sarwar Khan, Power Minister Omar Ayub Khan, PM’s Adviser on Commerce Abdul Razak Dawood, PM’s Adviser on Accountability Shahzad Akbar and Chief of the Army Staff Gen Qamar Javed Bajwa, among others.
During his day-long trip, the prime minister had also met Sheikh Muhammad bin Rashid Al Maktoum, the vice president and prime minister of the UAE and ruler of Dubai.
With #UAE aid, #Pakistan bridges half gap with reduction in the current account deficit from $19 billion to around $13 billion for FY 18-19. #Debt servicing is now estimated at $8.8 billion. @pid_gov expects $4.5 billion in commercial loans. #economy #IMF https://tribune.com.pk/story/1872107/2-uae-aid-pakistan-bridges-half-financing-gap/
With an announcement by the United Arab Emirates (UAE) that it is giving $3 billion in loans, Pakistan government has bridged half of the financing gap after including Saudi Arabian assistance, but it still waits for another $6 billion that will mainly come from commercial banks.
The Ministry of Finance’s financing lineup shows deposits of $6 billion by the monetary authorities, after the assistance from the UAE and Saudi Arabia. On top of that, receipt of $4.3 billion has been estimated on account of oil financing facilities from the Islamic Development Bank and Saudi Arabia during the current fiscal year.
Still, $4.5 billion would be required in commercial loans from foreign banks to meet the revised external financing requirement of $22 billion, said sources in the Ministry of Finance.
IMF projects inflation rate to hit 14% by June
They said Pakistan had already received $450 million worth of foreign commercial loans in first five months of the current fiscal year and it needed another $4 billion in the remaining seven months.
The UAE announced on Friday that it would deposit $3 billion in the State Bank of Pakistan (SBP) to bolster the country’s dwindling foreign currency reserves. With the announcement, the UAE will match the assistance from Saudi Arabia, which had agreed to park $3 billion in Pakistan’s foreign exchange reserves.
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Saudi Arabia has already announced a $6-billion assistance package, equally divided between cash and oil supply on deferred payments. Of that, $2 billion has already been deposited with the central bank.
In the outgoing week, Finance Minister Asad Umar told a parliamentary panel that Pakistan would pay 3.18% interest on the Saudi loan.
“It is expected that loan terms for the UAE financial assistance will be similar to the Saudi loan,” said a senior government official.
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For the current fiscal year 2018-19, the finance ministry has projected that gross external financing requirement of Pakistan will be $22 billion, down from initial estimates of $28 billion. This is primarily due to reduction in the current account deficit projection from $19 billion to around $13 billion, according to the ministry’s estimates.
During the first five months of FY19, the current account deficit stood at $6 billion, which was 11% less than the comparative period of previous year. But the pace was not enough to restrict the deficit to $13 billion in the remaining seven months of the year.
Debt servicing has now been estimated at $8.8 billion, suggesting repayment of some of the maturing deposits has been deferred.
Against the annual budgetary projection of $2 billion, the government has estimated receiving $4.5 billion on account of commercial loans. These include $1.7 billion in short-term commercial loans and $2.8 billion in medium-term commercial borrowings. Most of these loans are expected to come from Chinese commercial banks.
The government has dropped the plan of issuing $3 billion worth of Eurobond and Sukuk in the current fiscal year and proceeds of only $700 million have been projected, probably on account of Diaspora bonds.
Commercial borrowing has been replaced with sovereign bonds aimed at avoiding a high financing cost in the absence of an International Monetary Fund (IMF) programme. But this will increase refinancing risks due to the short tenor of commercial borrowings.
Another $2 billion is expected to come from some “unidentified sources”.
Nearly $2 billion in Chinese project financing has been estimated for the current fiscal year to meet the financing gap.
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Project financing from these two organisations has now been estimated at slightly over $1 billion.
#Beijing to lend $2 billion to #Pakistan to shore up rupee. This financial support signals deepening #economic ties between #China and Pakistan even as #Islamabad is negotiating with the #IMF for a potential $7 to $8 billion loan. #CPEC https://www.ft.com/content/bd083b78-0d70-11e9-acdc-4d9976f1533b via @financialtimes
China has pledged to lend at least $2bn to Pakistan to shore up its foreign exchange reserves and prevent further devaluations of the rupee against the dollar, two senior government officials have told the Financial Times.
The financial support, which is not being publicly announced by China, comes as the government of Prime Minister Imran Khan is struggling with a weakening fiscal position, high debt repayments and dwindling reserves.
“China’s promise to Pakistan is an indication of their commitment to help us avoid a crisis. If the rupee falls sharply and we need to prevent its slide, we can turn to China,” said a senior government official in Islamabad.
Chinese officials were not immediately available for comment.
The promised financial support signals deepening economic ties between China and Pakistan even as Islamabad is negotiating with the IMF for a potential $7bn to $8bn loan.
Pakistan’s finance ministry and the IMF are due to resume discussions later this month on details of the package, which is expected to come with tough conditions, such as slimming down the country’s bloated state-owned enterprises through job cuts.
The rupee has lost more than a fifth of its value against the dollar since late 2017 and Fitch has cut Pakistan’s debt rating deeper into junk territory last month. Pakistan’s foreign reserves, at $7.3bn, have dropped to about one and a half months of import cover, regarded as a critically low level, said economists.
After decades of close military co-operation, Beijing has been stepping up financial support for Pakistan, with Chinese state-backed banks lending $4bn to Islamabad in the year ending June 2017.
China has committed to invest more than $60bn in infrastructure, energy, railway and road projects in Pakistan under the China-Pakistan Economic Corridor, a centrepiece of Chinese president Xi Jinping’s Belt and Road Initiative. The corridor is intended to link China’s western region with Pakistan’s newest deep seaport financed by Beijing at Gwadar near the Gulf.
In December, Mr Khan’s cabinet approved a plan to issue renminbi denominated “panda bonds” in the Chinese market, which one officials said could raise $1bn to $1.2bn.
Analysts said that by not publicly announcing its offer to Pakistan, Beijing hoped to avoid further raising US concerns over its relationship with Islamabad.
In July 2018, Mike Pompeo, the US secretary of state, warned the IMF against a bailout to Pakistan that would help the country pay back its loans to China.
Zubair Khan, a former Pakistan commerce minister, said China’s discreet dealings with Pakistan were not meant to “undercut” the IMF. “China is a very important member of the IMF. They [China] also want Pakistan to fix our economy,” he said.
Pakistan’s allies in the Middle East are also stepping up to help Islamabad. Saudi Arabia has pledged to lend $6bn to Pakistan in the financial year to June 2019 while the United Arab Emirates has promised to lend another $3bn during the same period.
The south Asian country’s recurring challenges include a persistent failure to reform one of the world’s worst performing tax collections. Less than 1 per cent of Pakistan’s population pays income tax.
The economy in 2019 by Hammad Azhar
The economy has slowed down, the Rupee has been devalued, interest rates have gone up and there has been some increase in the rate of inflation in the country. Why has this happened? And what prospects does the economy hold in 2019? This article answers the above questions in an honest and as simple a manner as is possible.
https://www.thenews.com.pk/print/413356-the-economy-in-2019
Pakistan’s economy is recovering from what can be best described as a ‘consumption led’ growth period that was financed by short term debt instruments and a stifling of investment climate. Consumption as percentage of GDP went up from the already worrying figure of 91.8% in FY14 to 94.5% in 2018. Correspondingly, total gross investment (that includes government investment also) in Pakistan was reported at just 16.4% of GDP in FY18 whereas India’s figure stands at close to 30% and Bangladesh is at 31% of GDP. Additionally, our spur of consumption spree was associated with policies in the past that instead of channeling the countries resources into savings, investments and industrialization further aggravated the problem of private investment. And here’s how:
To begin with, we saw a very visible deterioration in the economy’s fundamentals as the country exited the last IMF program in 2016 and all forms of fiscal and monetary discipline were abandoned. What this means is that we were fuelling growth in the economy by spending from resources that we did not have. For example, in the last financial year alone, RS 1300 billion of government spending was financed by printing money and monetization of public debt. The previous government was also happy to ask FBR to withhold genuine refunds to the tune of hundreds of billions of Rupees of businessmen and entrepreneurs that further squeezed their working capital and halted all their expansions. This whole model broadly represented the previous government’s fiscal policy and it’s no surprise that it fuelled only consumption growth. And it also led to whopping RS 2300 billion or 6.6 % of fiscal deficit in the system i.e. the excess of government spending over government’s income.
Now let’s take a look at the monetary side. In the first 4 years of the previous government, the Real Exchange Rate (the buying power of the currency in comparison to other currencies) appreciated by 28% without any improvement in the trade deficit to justify this increase. This means that our exports became that much uncompetitive in the international markets and we began subsidizing our imports. This led to the closure of hundreds of export houses and fuelled a largely consumption led increase in our imports. From a point where we had a Current Account deficit of just USD 2.5 BN in 2013, the figure soared to USD 19 Billion in 2018.
The second aspect of monetary policy is Interest Rates. The interest rates were kept low in the past but that also did not translate into any notable increase in private sector borrowing, the loans that our entrepreneurs use for investments and setting up businesses and industry. The reason that private sector was not advanced these loans by the banks is that the government was doing what the economists call ‘crowding out’ the private sector. The banks were more than happy to lend to the government in the form of Treasury Bills. So in effect, the lower interest rates actually did not lead to any investment and the whole monetary scheme of things further fuelled the consumption spree.
The result of the above mentioned fiscal and monetary policies was not surprising for any economist. The country came on the verge of bankruptcy at the close of the last financial year (FY2018). Once both the IMF program ended and oil prices began to rise, the superficial nature of the whole economic model unfolded and the State was left with nothing to finance its fiscal expenditures and its huge import bill.
So what has the new government done about this? And what does it plan to do in order to make sure that the repeat of the above does not take place?
#Saudi #investments at #Gwadar port will soon be announced in #mining, #energy, #oil, #electricity, #renewable #energy sectors in #Pakistan. #Saudi delegation of #businessmen, #investors, members of #trade and #industry chambers visiting #Gwadar. #CPEC https://aawsat.com/node/1530696
A delegation of Saudi businessmen, investors and members of trade and industry chambers visited Wednesday Pakistan’s Gwadar port, the main hub for the China Pakistan Economic Corridor linked to the Silk Road initiative.
During the visit, the delegation reviewed investment opportunities at the port as well as in the special economic zones created by the Economic Corridor.
Saudi ambassador to Pakistan Nawaf al-Maliki indicated that Gwadar has many commercial and investment benefits for Saudi investors.
He pointed out that the Pakistani government promised to provide them with incentives and services.
Maliki stressed that the Kingdom is keen to invest in the Economic Corridor, saying Saudi investments at Gwadar port will be announced soon, a move that contributes to boosting Pakistan’s economic stability.
Adviser to the Saudi Minister of Energy, Ahmed al-Ghamdi, told Asharq Al-Awsat that the Saudi-Pakistani Coordination Council for Economic Collaboration will inform businessmen and other government agencies in Saudi Arabia about investment opportunities in the Pakistani port.
“Saudi Arabia is seeking to find an investment opportunity in Pakistan in general and in the port (Gwadar) in particular given its strategic area,” he said.
The adviser revealed that several Saudi state projects in mining, energy, oil, electricity and renewable energy, are underway in Balochistan province.
For his part, a member of the Council of Saudi Chambers, Khalil Mansour al-Afraa, stressed that the Council’s efforts come in tandem with the search for investment opportunities in industry and infrastructure by Saudi businessmen.
Afra revealed to Asharq Al-Awsat that an exhibition for businessmen from Pakistan and China will be held at the port in March.
#Pakistan asks #China to diversify #investments, PM adviser Razzak Dawood says. Country wants more #Chinese money in #agriculture, #industrialization and #education. #CPEC https://asia.nikkei.com/Spotlight/Belt-and-Road/Pakistan-asks-China-to-diversify-investments-PM-adviser-says
So far, most CPEC projects have focused on power and infrastructure. But Dawood said the country has actually canceled some power projects due to them being "too large and unnecessary."
"Now, we are saying, 'No thank you.' Pakistan is asking China to look at industrialization, agriculture and education in line with the CPEC," he explained.
He said Pakistan have to diversify CPEC projects. After being criticized about its loan shark-like tactics related to the Belt and Road Initiative, China has been reconsidering its approach. An expert in Chinese politics pointed out, "Now the Chinese leadership is reviewing CPEC by mobilizing their research institutes. They are paying much more attention to the situations in recipient countries and their sentiment toward China."
Pakistan is going through hard times. The country has suffered a severe financial crunch due to huge expenditures on infrastructure, especially in the power sector, and too many imports of electrical equipment, steel products and other necessities related to the CPEC. As a result, its current-account deficit has skyrocketed and foreign reserves have dropped to their lowest level in four years.
In its latest outlook, the International Monetary Fund sees Pakistan's economic growth slowing to 4% in 2019. But Finance Minister Asad Umar recently pointed out that the economy is already on the road to recovery.
Dawood explained that Umar is not talking about growth rate, but about stabilizing the economy. "We will go through a period of lower growth for one or two years, then our economy will pick up," Dawood said.
Now, both domestic industrialists and foreign investors are closely watching the country's negotiations with the IMF over an $8 billion bailout package.
Dawood stressed, however, that Pakistan is not relying solely on the IMF. "We are approaching friendly countries, that is, Saudi Arabia, the United Arab Emirates and China, " he said. Pakistan has already confirmed receiving aid packages from Saudi Arabia and UAE.
According to Dawood, Pakistan "will make necessary arrangements" to overcome its current difficulties.
The country is also trying to meet the IMF's call for tax reform. Dawood noted Pakistan has introduced a reform package that includes simplification of tax layers and the rebalancing of direct and indirect taxes. "The informal sector does not pay tax, so widening the tax net is important," he said.
This autumn, the country launched the "Make in Pakistan" initiative to boost exports, cut the trade deficit and develop the country's skills. "We are giving incentives again to manufacturing in Pakistan. We also reduced custom duties, and are talking a lot to get market access to China, Indonesia, Malaysia and so on," he said.
Pakistan is pinning its export hopes on manufactured goods like motorcycles, tractors, refrigerators, washing machines and transformers. It also hopes to tap into the global demand for information technology products and workers. "We have around 35,000 technical graduates every year," Dawood pointed out. "We know competition is very tough, but now Pakistan is exporting $3 billion of IT services and software annually."
Regarding foreign investment in Pakistan, Dawood gave some examples. "Unilever, Coca-Cola, Telenor and Suzuki Motor have made investments. Now, Exxon Mobile has re-established its office in Pakistan after more than 20 years, and announced a $250 million investment."
#Pakistan, #UAE finalize $6.2 billion #support package expected to be announced by Crown Prince Sheikh Mohammed bin Zayed Al Nahyan during his visit to #Islamabad starting on Sunday (Jan 6). It includes $3.2 billion deferred oil payments, $3 billion cash. https://www.dawn.com/news/1455585
He said the UAE’s package was exactly of the same size and terms and conditions as given by Saudi Arabia. The UAE package was finalised on Thursday evening, he said.
With this, Pakistan would get a total saving of about $7.9bn on oil and gas imports from the two friendly countries — accounting for more than 60 per cent of annual oil import bill of about $12-13bn, he said. This includes about $3.2bn each of oil supplies on deferred payments from the UAE and Saudi Arabia and about $1.5bn trade finance from the International Islamic Trade Finance Corporation (ITFC).
The total financing support from the UAE and Saudi Arabia, including the ITFC’s trade finance, would be around $13.9-14bn when cash deposits of $3bn each from the two countries were also included, he said.
This is in addition to a deep-conversion oil refinery to be set up by Parco — a joint venture of Pakistan and Abdu Dhabi — worth $5-6bn at Khalifa Point and an expected petro-chemical complex by Saudi Arabia at Gwadar Oil City.
On top of that, the government has also started backchannel discussions with Qatar for some relief in terms of reduction in LNG prices or a relaxed payment schedule, but that is now at an early stage.
In reply to a question, the cabinet member said Pakistan was deepening relationships with all three friendly Islamic nations without compromising bilateral ties for geo-political reasons.
He said the UAE crown prince would be paying a two-day visit, adding that all arrangements had been finalised in this regard.
He said Saudi Crown Prince Mohammad bin Salman was expected to arrive in the country in the first week of February and an MoU for establishing a petro-chemical complex was still being worked out on the request of Riyadh.
Pakistan has already received $2bn in cash deposit from Saudi Arabia at an interest rate of 3.18pc while the third tranche of $1bn is due in the first week of February. The Saudi oil facility would also start rolling out this month with an average $274 million per month.
Pakistan is currently importing about eight cargoes of LNG every month, costing $4.2 to $4.5bn a year and more than one-third of this could be financed through ITCF support. With support from Qatar, Pakistan is expecting about $9bn cushion in total oil and gas import bill.
#Saudi to set up $10 billion #oil #refinery in #Pakistan."#SaudiArabia wants to make Pakistan's economic development stable through establishing an oil refinery and partnership with Pakistan in #CPEC" Saudi Energy Khalid al-Falih told reporters in #Gwadar https://cnb.cx/2TJMPDz
Saudi Arabia plans to set up a $10 billion oil refinery in Pakistan's deepwater port of Gwadar, the Saudi energy minister said on Saturday, speaking at the Indian Ocean port that is being developed with the help of China.
Pakistan wants to attract investment and other financial support to tackle a soaring current account deficit caused partly by rising oil prices. Last year, Saudi Arabia offered Pakistan a $6 billion package that included help to finance crude imports.
"Saudi Arabia wants to make Pakistan's economic development stable throughestablishing an oil refinery and partnership with Pakistan in the China Pakistan Economic Corridor," Saudi Energy Khalid al-Falih told reporters in Gwadar.
He said Crown Prince Mohammad bin Salman would visit Pakistan in February to sign the agreement. The minister added that Saudi Arabia would also invest in other sectors.
Beijing has pledged $60 billion as part of the China Pakistan Economic Corridor (CPEC) that involves building power stations, major highways, new and upgraded railways and higher capacity ports, to help turn Pakistan into a major overland route linking western China to the world.
"With setting up of an oil refinery in Gwadar, Saudi Arabia will become an important partner in CPEC," Pakistan Petroleum Minister Ghulam Sarwar Khan said.
The Saudi news agency SPA earlier reported that Falih met Pakistan's petroleum minister and Maritime Affairs Minister Ali Zaidi in Gwadar to discuss cooperation in refining, petrochemicals, mining and renewable energy.
It said Falih would finalise arrangements ahead of signing memorandums of understanding.
Since the government of Prime Minister Imran Khan came to power in August, Pakistan has secured economic assistance packages from Saudi Arabia, the United Arab Emirates and China.
In November, Pakistan extended talks with the International Monetary Fund as it seeks its 13th bailout since the late 1980s to deal with a looming balance of payments crisis.
The Pakistani prime minister's office had said on Thursday that Islamabad expected to sign investment agreements with Saudi Arabia and the UAE in coming weeks.
#Islamabad confirms death of 6 #Pakistanis in #ChristchurchTERRORISTattack . Names of Shaheeds from #Pakistan: “Sohail Shahid, Syed Jahandad Ali, Syed Areeb Ahmed, Mahboob Haroon, Naeem Rashid and his son, Talha Naeem. #NewZealand https://www.pakistantoday.com.pk/2019/03/16/pakistan-releases-list-of-missing-citizens-after-nz-mosque-attacks/#.XI0TBvtdCnU.twitter
Out of 49 people who were killed in mass shootings in New Zealand’s Christchurch on Friday, at least six belonged to Pakistan, confirmed Foreign Office Spokesperson Mohammad Faisal on Saturday.
“Sohail Shahid, Syed Jahandad Ali, Syed Areeb Ahmed, Mahboob Haroon, Naeem Rashid and his son, Talha Naeem, have been pronounced dead by the authorities,” said Dr Faisal in a tweet.
On Friday, at least four Pakistani nationals were reportedly injured and five others had gone missing after violent gun attacks on two mosques in Christchurch. Three Pakistani however still remain missing and a search for them is underway.
The FO confirmed the death of six Pakistanis shortly after list issued earlier on Saturday. The list included: Zeeshan Raza; father of Zeeshan Raza; mother of Zeeshan Raza; Haroon Mahmood, son of Shahid Mehmood; Sohail Shahid, son of Muhammad Shabbir; Syed Areeb Ahmed, son of Ayaz Ahmed; Syed Jahanand Ali Talha Naeem; Naeem Rashid.
Naeem Rashid and his son Talha Naeem tried to intercept the shooter, but they were shot dead in their attempt. Naeem and Talha, who hailed from Abbottabad, was injured as he attempted to overpower the attacker and later succumbed to injuries.
Minister for Foreign Affairs Shah Mahmood Qureshi also spoke to the media about the terror attack on Saturday.
“We are waiting for identification of [missing] Pakistanis. Obviously I’m getting more worried with time as we have not been able to contact them [the missing Pakistanis] and I fear that they might be on the list of martyrs. But nothing has been communicated to us officially yet and to say anything before an official confirmation will be speculation,” he said while condemning the attack in strong words.
TERRORIST CHARGED WITH MURDER:
A right-wing extremist who filmed himself on a shooting rampage flashed a white power gesture as he appeared in a New Zealand court on Saturday and was charged with murder.
Australian-born 28-year-old Brenton Tarrant stood in the dock wearing handcuffs and a white prison smock, as the judge read a single murder charge against him. A raft of further charges is expected.
The former fitness instructor and self-professed fascist occasionally turned to look at media present in court during the brief hearing that the public were excluded from for security reasons.
Flanked by armed police he made an upside-down “okay” signal, a symbol used by white power groups across the globe. He did not request bail and was taken into custody until his next court appearance which is scheduled for April 5.
A short distance from the court, 39 people were being treated in hospital for gunshot wounds and other injuries inflicted in the massacre.
The wounded included a two-year-old boy and a four-year-old girl, who was in critical condition.
‘MUSLIMS STILL LOVE THIS COUNTRY:’
In a separate development, an imam who was leading prayers at one of the mosques said the Muslim community’s love for New Zealand would not be shaken by the massacre, reported The Telegraph.
“We still love this country,” said Ibrahim Abdul Halim, imam of Linwood Mosque, vowing that extremists would “never ever touch our confidence”.
Halim gave a harrowing account of the moment during Friday prayers when gunshots rang out in the mosque, replacing peaceful reflection with screaming, bloodshed and death.
“Everyone laid down on the floor, and some women started crying, some people died immediately,” he said.
But, he said, New Zealand Muslims still felt at home in the south Pacific nation.
“My children live here” he said, adding, “we are happy”.
#UAE Expat Population 2018: #India 2.62 million, #Pakistan 1.21 million, #Bangladesh 0.71m, #Philippines 0.53m, #Iran 0.45m, #Egypt 0.40m, #Nepal & #SriLanka 0.30 million each, #china 0.20 million, All Others: 1.71 million. All others: 1.71 million https://www.globalmediainsight.com/blog/uae-population-statistics/ …
https://twitter.com/haqsmusings/status/1114185279898656770
In US, there are 450,000 Pakistanis and 3.2 million Indians... a ratio of about 7:1 http://www.riazhaq.com/2017/08/pakistani-diaspora-thriving-in-america.html?m=1
Most people who haven’t seen the US data have a similar feeling in America as you do about UAE. It’s important to look at the actual data. If you compare remittances from UAE to India vs Pakistan, the ratio is about 6. Read this https://m.khaleejtimes.com/business/banking-finance/Indians-top-the-list-of-remittances-to-cash-in-on-weaker-rupee--
During the first ten months of 2015, a total of 774,795 migrant workers left Pakistan. That number is presumed to have exceeded 800,000 by end of December 2015, constituting yet a new record.
http://www.oit.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilo-kathmandu/documents/publication/wcms_514139.pdf
Over the past decade, there has been a substantial increase in the foreign employment of Paki- stanis. There are three modes for migrating overseas: through overseas employment promoters, through the OEC and for workers to directly obtain employment. The data on workers using an overseas employment promoter and managing overseas migration on their own is collected by the BEOE. The OEC maintains its own records. Based on both sets of records, more than 8.7 million Pakistani workers have gone abroad for employment since the 1970s. Most of them were registered with the BEOE, with only a total of 139,354 Pakistani workers using the services of the OEC over the past five decades. According to the BEOE records, the annual placement of Pakistanis increased from 143,329 in 2005 to 431,842 in 2008. After a decline during the following two years, it reached 458,229 migrant workers in 2011 before jumping to 639,601 workers in 2012 and 753,841 workers in 2014 (figure 1). During the first ten months of 2015, a total of 774,795 migrant workers left Pakistan. That number is presumed to have exceeded 800,000 by end of December 2015, constituting yet a new record.
During the economic boom period (2005–08), there was an increasing trend of overseas migration, from 4 per cent in 2005 to 10.5 per cent in 2008. After 2008, the world economies as well as the economies of the Gulf Cooperation Council (GCC) countries (popular destinations for Pakistani workers) were hit hard by the global financial cri- sis. There was then a substantial decline in economic growth across the globe, severely affecting overseas migration. As a result, demand for foreign labour declined in GCC countries and, hence, overseas migration from Pakistan declined. The flow of overseas migration increased at an average growth of 8 per cent instead of 10 per cent during that crisis period. The pace picked up after 2011, returning to a growth rate of more than 10 per cent per annum.
Pakistan is administratively demarcated into four provinces and three regions (the Federally Administered Tribal Areas, Gilgit-Baltistan and Azad Jammu and Kashmir). There are 148 dis- tricts2 in these provinces and regions. The data on the origin of migrants from Pakistan is not evenly distributed across provinces and regions nor across districts; rather, there appears to be a concentration in some districts. Between 1981 and 2015, as shown in Map 1, more than 4.1 million workers from Punjab Province who registered with the BEOE went abroad for employ- ment, followed by more than 2 million workers from Khyber Pakhtunkhwa Province, 757,053 workers from Sindh Province, 404,698 workers from the Federally Administered Tribal Areas and 94,942 from Balochistan.
United Nations International Migration Report
https://www.un.org/en/development/desa/population/migration/publications/migrationreport/docs/MigrationReport2017_Highlights.pdf
In 2017, India was the largest country of origin of
international migrants (17 million), followed by
Mexico (13 million). Other countries of origin with
large migrant populations include the Russian
Federation (11 million), China (10 million),
Bangladesh (7 million), Syrian Arab Republic (7
million) and Pakistan and Ukraine (6 million each).
Globally, the twenty largest countries or areas of origin account for almost half (49 per
cent) of all international migrants, while one-third (34 per cent) of all international migrants
originates in only ten countries. India is now the country with the largest number of people
living outside the country’s borders (“diaspora”), followed by Mexico, the Russian
Federation and China. In 2017, 16.6 million persons from India were living in another
country compared to 13.0 million for Mexico (figure 7). Other countries with significant
“diaspora” populations are the Russian Federation (10.6 million), China (10.0 million),
13
International Migration Report 2017: Highlights
Bangladesh (7.5 million), Syrian Arab Republic (6.9 million), Pakistan (6.0 million) and
Ukraine (5.9 million). Of the twenty largest countries or areas of origin of international
migrants, eleven were located in Asia, six in Europe, and one each in Africa, Latin America
and the Caribbean, and Northern America.
There has been a major decline in manpower export to Saudi Arabia where only 100,910 emigrants proceeded for employment in the year 2018 as compared to 2017, a drop of 42,453 emigrants.
https://www.thenews.com.pk/print/482725-massive-decline-in-manpower-export-to-saudi-arabia-uae-observed
According to Economic Survey 2018-19, no doubt Overseas Employment Migration has an important role in respect of employment creation and poverty eradication. International migration creates significant financial and social benefits for migrants, for their families, and for the countries of origin and destination. Pakistan is one of the largest labour exporting countries of the region and since 1971, more than 10.61 million Pakistanis have proceeded abroad for employment.
It unfolds saying that major decline has been observed in manpower export to Saudi Arabia as only 100,910 proceeded for employment in year 2018 as compared to 2017, a drop of 42,453 emigrants.
More importantly, the situation of manpower export to UAE is also not different from the export to Saudi Arabia as manpower export to UAE also decreased in 2018. In recent years, Malaysia emerged as an important destination country for Pakistani workers as in 2018 increase of 38 percent manpower export towards Malaysia was observed as compared to 2017. Due to the present government‘s efforts for enhancing manpower export, an increasing trend has been observed in Qatar, which is a positive sign.
It also tells that the highest number of workers who went abroad was 185,902 from Punjab, followed by Khyber Pakhtunkhwa 88,361. From Northern Areas, the number of registered workers increased from 3,417 in 2017 to 4,185 in 2018.
However, the situation in other provinces is not encouraging which shows that there is a need to understand the changing trends/dynamics of labour importing countries in order to meet the manpower demand in future.
During 2018, there has been a declining trend in all occupational groups except in the highly qualified category. The scope for low skilled workers is declining and competition among expatriates is increasing. The up skilling and certification of workforce is the pressing need of the time to meet the international standards and demand. In this regard, the role of NAVTTC, TEVTAs and Higher Education Commission (HEC) is crucial to produce skilled and qualified workforce. Moreover, efforts are required at government to government (G2G) level to secure employment opportunities for the Pakistani workforce.
---------------------------
Table 12.7: Number of Pakistani Workers Registered Abroad
S. No. Countries 2014 2015 2016 2017 2018
1 UAE 350,522 326,986 295,647 275436 208635
2 Bahrain 9,226 9,029 8,226 7,919 5745
3 Malaysia 20,577 20,216 10,625 7,174 9881
4 Oman 39,793 47,788 45,085 42,362 27202
5 Qatar 10,042 12,741 9,706 11,592 20993
6 Saudi Arabia 312,489 522,750 462,598 143,363 100910
7 UK 250 260 346 340 587
http://finance.gov.pk/survey/chapters_19/Economic_Survey_2018_19.pdf
2019 International
Migration and
Displacement Trends
and Policies Report
to the G20
https://www.oecd.org/migration/mig/G20-migration-and-displacement-trends-and-policies-report-2019.pdf
As compared to other financial flows, remittance volumes to developing countries are large and have risen
steadily over the last 3 decades from USD 126 billion (1990) to USD 528 billion (2018) (Figure 12). In
2018, remittance flows rose in all regions, most notably in Europe and Central Asia (20 percent) and South
Asia (13.5 percent). These remittance flows are over 3 times the size of ODA flows and higher than FDI
flows (excluding China), thereby forming an important source of development finance. For example, in
Africa, remittances have been the largest and most stable source of international financial flows since 2010.
Remittances are therefore significant contributors to GDP, form a valuable source of foreign exchange for
governments and play a role in stabilizing the external sector. Globally the top 5 remittance receiving
countries are India, China, Philippines, Mexico, Pakistan and the top 5 Remittance source countries are the
United States, Saudi Arabia, Switzerland, China and Russia.
Immigrants from the main countries of origin tend to be concentrated in either OECD or non-OECD G20
countries. Nearly all of the immigrants from Mexico, Poland, Romania, Morocco and the Russian Federation
lived in G20 countries in 2015/16. In contrast, most immigrants from Bangladesh, Ukraine, Pakistan and
Kazakhstan resided in non-OECD countries.
The demographic profile of immigrants in G20 countries varies by origin and destination. Overall, half of
the foreign born in 2015/16 were women, but this share varied among the top 15 origin countries from a low
of 40% for Pakistan to a high of 60% for the Philippines. More than half of the top 15 countries had emigrant
populations with majorities of women (Ukraine, China, Philippines, Poland, Kazakhstan, Germany, Romania
and the Russian Federation). Almost 52% of immigrants in OECD countries were women, while this share
was 43% for non-OECD countries. Only 11% of immigrants were between 15 and 24 years old, ranging from
20 only 5% of Italian immigrants to 17% of Chinese immigrants. A slightly higher share of immigrants in nonOECD countries (14%) were between 15 and 24 years old.
2019 International
Migration and
Displacement Trends
and Policies Report
to the G20
https://www.oecd.org/migration/mig/G20-migration-and-displacement-trends-and-policies-report-2019.pdf
As compared to other financial flows, remittance volumes to developing countries are large and have risen
steadily over the last 3 decades from USD 126 billion (1990) to USD 528 billion (2018) (Figure 12). In
2018, remittance flows rose in all regions, most notably in Europe and Central Asia (20 percent) and South
Asia (13.5 percent). These remittance flows are over 3 times the size of ODA flows and higher than FDI
flows (excluding China), thereby forming an important source of development finance. For example, in
Africa, remittances have been the largest and most stable source of international financial flows since 2010.
Remittances are therefore significant contributors to GDP, form a valuable source of foreign exchange for
governments and play a role in stabilizing the external sector. Globally the top 5 remittance receiving
countries are India, China, Philippines, Mexico, Pakistan and the top 5 Remittance source countries are the
United States, Saudi Arabia, Switzerland, China and Russia.
Immigrants from the main countries of origin tend to be concentrated in either OECD or non-OECD G20
countries. Nearly all of the immigrants from Mexico, Poland, Romania, Morocco and the Russian Federation
lived in G20 countries in 2015/16. In contrast, most immigrants from Bangladesh, Ukraine, Pakistan and
Kazakhstan resided in non-OECD countries.
The demographic profile of immigrants in G20 countries varies by origin and destination. Overall, half of
the foreign born in 2015/16 were women, but this share varied among the top 15 origin countries from a low
of 40% for Pakistan to a high of 60% for the Philippines. More than half of the top 15 countries had emigrant
populations with majorities of women (Ukraine, China, Philippines, Poland, Kazakhstan, Germany, Romania
and the Russian Federation). Almost 52% of immigrants in OECD countries were women, while this share
was 43% for non-OECD countries. Only 11% of immigrants were between 15 and 24 years old, ranging from
20 only 5% of Italian immigrants to 17% of Chinese immigrants. A slightly higher share of immigrants in nonOECD countries (14%) were between 15 and 24 years old.
Remittances to #Pakistan jump over 9% in January 2020 totaling $1.90 billion vs $1.744 billion in Jan 2019. #Remittances for July-January period of current FY $13.3 billion vs $12.77 billion in prior fiscal year, an increase of 4.1%. https://www.khaleejtimes.com/business/remittances-to-pakistan-jump-over-9-per-cent-in-january
During January 2020, remittances received from Saudi Arabia fell 8.4 per cent to $433.4 million while Pakistani nationals in the UAE remitted $395.5 million, a decline of 7.5 per cent.
Remittances from the other major markets such as the USA and UK fell 6.3 per cent and 7.9 per cent to $335.1 million and $299.1 million, respectively.
---
Moreover, the State Bank of Pakistan also hiked payment limits against freelance services for an individual in computer and information systems and other freelance services from $5,000 per month to $25,000 in order to attract more foreign exchange.
"The enhancement in limit will facilitate freelancers to route greater value of funds through a more economical and efficient channel of home remittances and help in receiving foreign exchange flows through formal banking channels in the country. This would also enable freelancers to expand their business/ operations and engage new freelancers to join the workforce," the central bank said in its statement.
---------------------
Moody's: Rising workers’ #remittances bode well for #Pakistan #economy. In 2012-19 period, remittances rose at a compounded annual rate of nearly 9%, with majority of inflows coming from #GCC (54%), #US (16pc), #UK (16pc) and #Malaysia (7%). https://profit.pakistantoday.com.pk/2020/02/17/increase-in-workers-remittances-bodes-well-for-pakistan-moodys/ via @Profitpk
An increase in worker’s remittances is positive for Pakistani banks and borrowers, as it supports deposit flows and strengthens household finances, according to the credit rating agency Moody’s.
In a report published on Monday, the agency said that the high levels of remittances have contributed to reported double-digit growth in residents’ household deposits.
Earlier on 12 February, the State Bank of Pakistan (SBP) released updated monthly data on workers’ remittances, which showed a 4pc increase in the monthly average for the fiscal year 2020, compared to the previous corresponding year.
According to SBP data, workers’ remittances received during the first seven months of FY20 amounted to a cumulative total of $13.3 billion.
The agency noted that the growth [in remittances] has provided a stable and low-cost deposit base to Pakistani banks, which in turn has enhanced banks’ profitability and increased their liquidity buffers.
The report further stated that the growth might help mitigate the effect of government deposit outflows. The SBP is considering introducing a Treasury Single Account, which will require government deposits to be placed with the SBP instead.
Despite Pakistan’s high-interest rates (unchanged since July 2019 at 13.25pc), the remittances have helped negate any associated challenges. That’s because households are better positioned to meet their financial obligations with banks.
Non-performing loans have also been maintained at historically low levels; consumer NPLs accounted for 5pc of total consumer loans as of the end of September 2019, while the system average NPL ratio was 8.8pc.
According to the World Bank, Pakistan was the seventh-largest recipient of remittances globally in 2018, with remittances inflows reaching $21 billion or 6.8pc of the country’s GDP.
Global #remittance flows expected to plunge by more than $100 billion, hitting #India, #Pakistan, #Egypt, #Nigeria, and the #Philippines where remittances are crucial source of external financing. #COVID19 #lockdown #OilPrice #economy https://www.ft.com/content/471cb6b2-f354-4fe0-b36f-3078a506a2d8 via @financialtimes
Remittance flows around the world are expected to plummet by more than $100bn this year, depleting a vital source of financing for low and middle-income nations as they struggle with the economic chaos triggered by the coronavirus pandemic, according to the World Bank.
In a report released on Wednesday, the bank said the impact of lockdowns that have closed economies across the globe and the resulting job losses would cause a 20 per cent decline in remittance flows to low and middle income countries compared with last year, from a record $554bn to $445bn.
It would be the largest fall in recent history, and those most vulnerable to the decline include fragile states such as Somalia, Haiti and South Sudan, and small island nations such as Tonga, with remittances accounting for more than a third of gross domestic product in some. Larger countries including India, Pakistan, Egypt, Nigeria, and the Philippines will also be hit as remittances have become a crucial source of external financing for them.
Dilip Ratha, the World Bank’s lead economist for migration and remittances, told the Financial Times that the fall would be a “major financial shock” to countries that depend on remittances.
“If we are expecting a fall of 20 per cent it’s going to be a huge shock, it’s going to cause a lot of hardship for countries in terms of macroeconomic management and balance of payments difficulties,” Mr Ratha said. “But more important is the human story . . . The number of people who are going to be impacted — both for the migrants in host countries and families back home it’s going to be huge.”
Last year, remittances overtook foreign direct investment to become the biggest source of capital inflows to low and middle-income countries for the first time; they accounted for about 8.9 per cent of GDP in poorer countries in 2019.
The World Bank estimates that in 2019 there were 272m international migrants — including 26m refugees — and more than 700m internal migrants around the world providing financial support to dependants elsewhere. But foreign workers are often the first to lose their jobs in times of crisis.
As global travel has been frozen, many are now in limbo, neither able to work nor to return to their home countries.
Some governments have introduced measures to support business to ensure they continue paying workers. But the World Bank said: “So far, government policy responses to the Covid-19 crisis have largely excluded migrants and their families back home.”
There have also been allegations that some Gulf states, including Saudi Arabia and Qatar, have deported migrants during the crisis. Saudi officials deny they have forcibly repatriated workers and said Riyadh was co-operating with governments if migrants wanted to return. Doha said those it deported were involved in “illegal activities” and insisted it was adhering to international standards in its treatment of workers.
Lockdowns have also made it harder for migrants to send money back to their families as money-transfer offices have been forced to close; many poorer migrants do not have bank accounts and are not able to conduct online money transfers.
In the outgoing FY (2019-20), Pakistani expatriates remitted a record of $23.12 billion with more than 6% year-on-year (YoY) growth compared to $21.74 of FY 2018-19.
http://tribune.com.pk/article/97174/the-curious-case-of-pakistans-spiralling-remittances
The momentum has not only persisted but amplified in on-going FY 21 with a whopping $2.77 billion remittance in July, followed by an inflow of $2.095 billion in August. This unprecedented surge is bemusing, and what has baffled many is the fact that this escalation has occurred during the pandemic. So, what could the potential triggers to this mammoth inflow be?
The extraordinary leap can be primarily due to the tightening of informal money markets, which has augmented the inflow through formal banking channels. In the budget for FY 2020-21, the incumbents allocated Rs25 billion to formalise foreign remittances, which would aid in stockpiling foreign exchange reserves to service colossal national debt obligations.
Pakistanis typically used to carry cash in their luggage physically. But due to flight reduction and sparse international travels, they would have been compelled to access official banking channels for money transfers. Also, remittances might have incremented on account of significant job losses in the Gulf region due to the Covid-related recession. Hence the spiral may demonstrate high one-time repatriation of money back to Pakistan.
On the other hand, the State Bank of Pakistan (SBP) has emphasised an orderly ‘market-based’ exchange rate management and sound policymaking under the Pakistan Remittance Initiative. The SBP sheds the spotlight on the reduction of the threshold for eligible transactions from $200 to $100 under the Reimbursement of Telegraphic Transfer (TT) Charges Scheme. It also stressed on adoption of digital channels and targeted marketing campaigns to promote formal routes. Similarly, IT-related freelance services’ payment limits have increased from $5,000 to $25,000 per individual per month. The SBP believes that it has facilitated to enhance home remittances through formal banking channels in Pakistan.
The crux of the matter is remittances will upslope further in the future due to effectuated compliance of formal banking channels. Still, the recent abnormal increment will ease down in the coming months when the western economies recuperate from the ramifications of the Covid-related slump.
Fitch has warned of decline in remittances amid the #Coronavirus shock. But #remittances have been robust in #Pakistan and Bangladesh. ADB says 14% of households in #Bangladesh, 8% in #Philippines, 4% in Pakistan and 2% in #India receive remittance income. https://www.fitchratings.com/research/sovereigns/apac-remittances-to-decline-amid-coronavirus-shock-08-09-2020
Fitch Ratings-Hong Kong-08 September 2020: The coronavirus pandemic and subsequent impact on the oil market are having a considerable effect on migrant workers and are likely to supress remittance flows in the APAC region, Fitch Ratings says in a special report. We expect flows to weaken in the coming quarters, even though recent amounts have been surprisingly robust in some countries due to temporary factors. Declining remittances in economies that are dependent on them may affect sovereign ratings through pressures on external finances and economic growth.
Demand for migrant labour has provided an important and stable source of foreign-currency remittance flows for a number of APAC sovereigns, including Bangladesh (6.0% of GDP), Pakistan (7.9%), Sri Lanka (8.0%) and the Philippines (8.4%). India is the largest recipient of remittances globally but they account for a small share of GDP at 2.9%. Remittance flows have helped keep current account deficits contained by offsetting large trade deficits. Indeed, without remittances the Philippines, Pakistan, Sri Lanka, and Bangladesh would all have large current account deficits of between 7%-10% of GDP.
Remittances in APAC also provide economic benefits to recipient countries. First, they support domestic consumption by providing an additional income source to households. According to the Asian Development Bank, about 14% of households in Bangladesh receive remittance income, 8% in the Philippines, 4% in Pakistan and 2% in India. Second, job opportunities for migrant workers relieve slack in domestic job markets.
Remittance flows in APAC were surprisingly mixed in the second quarter of 2020. Monthly data show a considerable and broad decline in remittances during April and May, as Fitch expected, but a recovery in June and July. The rebound in flows was particularly robust in Pakistan and Bangladesh, where flows broke records in both June and July. Sri Lanka and the Philippines also saw an improvement in remittance flows in June, but much more modest.
Anecdotal evidence points to temporary factors for the increase in recorded remittances in the recent period. These include migrant workers transferring their savings in preparation to return home, the impact of lockdown restrictions on transferring funds and a shift to formal remittance channels, which are picked up in the official data.
Fitch forecasts a 12% decline across the region in the second half of the year as the temporary support factors fade.
The deterioration in remittance inflows is likely to widen current account deficits, contributing to higher external financing needs. For countries with fragile external finances, such as Pakistan and Sri Lanka, the shock to remittances could exacerbate existing challenges. Lower oil prices and subdued import demand, however, are likely to soften the aggregate impact on external balances.
Remittances typically provide a countercyclical buffer for economic activity and vulnerable households. In domestic economic shocks, family members working abroad can increase remittances to help mitigate the impact of sluggish domestic activity. The pandemic, however, represents a much more synchronised global economic shock than previous downturns. This limits the potential support of the remittance channel.
Lower remittance flows could affect public finances through two channels: lower revenue collection from weaker consumption and higher social spending to support remittance-dependent households as well as returning migrant workers. Many countries in the region already have limited fiscal space to address the current coronavirus shock and the decline in remittances could exacerbate current challenges.
Migrant workers from Asia’s developing countries have managed to send home record amounts of money in recent months, defying pandemic expectations and propping up home economies at a critical time.
https://economictimes.indiatimes.com/nri/forex-and-remittance/remittance-boom-is-turning-into-a-bust-for-emerging-markets-in-asia/articleshow/78251096.cms
Remittance doomsayers see something else in the bigger-than-usual transfers: a coming crash, triggered by a bleak job market, particularly in the Middle East. As they see opportunity drying up along with demand for oil, workers are sending money home in advance of their own return.
Unlike Latin American countries, which continue to benefit from a tentative U.S. recovery, Asian countries are vulnerable to economic austerity in Saudi Arabia and elsewhere in the Middle East. More than 60% of remittances to India, Bangladesh and Pakistan come from Gulf Cooperation Council countries, said Khurram Schehzad, chief executive officer at Karachi-based advisory Alpha Beta Core Solutions Pvt. The region is also the top destination for workers from the Philippines, lone of the world’s largest suppliers of overseas labor.
Saudi Arabia has already raised taxes and import fees to make up for falling oil revenue. Job cuts in the kingdom appear to target foreigners first, with Riyadh-based Jadwa Investment estimating more than a million foreign workers will leave the labor market this year.
After eight years of sending money to family in Karachi, Abdul Hanan Abro is one of the workers who will follow his money home. He was laid off from his acc ..He was laid off from his accounting job in Dubai in May and hasn’t found a new gig -- and he’s not the only one. “No one is getting anything,” said Abro. “Two to three of my friends have already moved back to Lahore. People are selling their cars and stuff, doing their final settlements.”
For Abro, coming home means starting over. He wants to use the savings he accumulated overseas to start a business. “It’s high time to just focus on what I was planning for two to three years now,” Abr ..coming home means starting over. He wants to use the savings he accumulated overseas to start a business. “It’s high time to just focus on what I was planning for two to three years now,” Abro said. “It’s better than wasting more time in finding a job in this market.”
In April, the World Bank predicted overseas workers would send home 20% less this year, the biggest drop since at least 1980. The lender hasn’t updated its forecast to reflect the recent resilience, but a decline is still ..
“People are returning home,” said Thomas Isaac, the finance minister for Kerala, which accounts for the country’s largest share of remittances. “Therefore, they bring back all their savings.” India is the world’s top recipient of transfers and a leading supplier of labor to the gulf; it took in $83 billion last year, exceeding the $51 billion it took in as foreign direct investment.
Overall, remittances to the Asia-Pacific region will drop 12% in the second half of 2020 compared with th ..
Kerala’s proud record for near-total literacy gave its citizens a leg-up over other Indians — not to mention Pakistanis, Bangladeshis and others — seeking jobs in the Gulf. Despite their better education, the overwhelming majority of Keralites did jobs that indeed required being “roasted in the desert sun,” as Dad put it. In the classic migration pattern, young men endured great physical hardship and forewent luxuries to save up, remit money home and bring over friends and relatives. The steady ..
Remittances Are a Lifeline for Developing Countries With Economic Instability
https://thefintechtimes.com/remittances-are-a-lifeline-for-developing-countries-with-economic-instability/
Remittances sent worldwide have increased 64.3 per cent in the past decade, rising from $420.1billion 10 years’ ago to $653.4billion in the last year, shows research by ACE Money Transfer, the online remittance provider.
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Global economic growth is expected to slump from 6.1 per cent last year to 3.2 per cent this year — significantly lower than the 4.1 per cent anticipated in January. This is due to rising interest rates and spiralling inflation. This slowdown in growth is expected to hit low-income countries harder.
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Remittances also play a key role in urban areas, helping drive investment into real estate and infrastructure in developing countries.
Rashid Ashraf, CEO of ACE Money Transfer, says, “Remittances have a massive impact on people’s lives across the world. When times are tough and economies are struggling, this is when remittances are particularly important.
“Around three-quarters of remittances sent globally are used to cover essential things, like putting food on the family’s table and covering medical expenses, school fees or housing expenses. In addition, in times of crises, migrant workers tend to send more money home to cover loss of crops or family emergencies.”
Countries facing significant economic stress at present include Sri Lanka, Pakistan, Nigeria and Nepal. Remittances play a key role in supporting the economies of all mentioned countries.
Remittances key to helping Sri Lanka and Nepal’s struggling economies
Sri Lanka in particular has struggled following the pandemic, with its economy having collapsed. The country has been short of cash to pay for vital food and fuel imports and has defaulted on its debt.
Remittances are a key pillar of Sri Lanka’s economy, reaching $7.1billion in the past year, up from $6.7billion the previous year. Remittances in Sri Lanka support economic growth, reduce the burden on social security payments and help alleviate poverty. Increases in remittances could significantly aid Sri Lanka’s economic recovery.
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How remittances can help moderate inflation in Pakistan and Nigeria
Pakistan and Nigeria are two other countries facing economic difficulties where remittances can play a key role in their recoveries. Both countries have been struggling with the effects of surging inflation this year.
Pakistan’s currency has devalued 28 per cent compared to the US dollar so far this year, fuelling surges in the prices of vital imported goods such as fuel, cooking oil and grains.
This has made remittances to Pakistan, which have risen 26 per cent to a record $33billion in the past year, even more important. Remittances are a key source of foreign currency for Pakistan and play a significant role in supporting its currency. This is in turn can help control inflation and the price of essential goods and services in the country.
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The role of remittances in strengthening resilient economies like the Philippines
Remittances can also play an important role in countries where the economy has remained resilient. This includes the Philippines’ economy, which has continued to show rapid expansion this year despite global headwinds.
An important stabilising factor in its economy has been remittances, which have reached a record high of $34.9billion in the past year. Remittances in the Philippines are important in supporting domestic consumer spending, which has driven the country’s economic growth.
Remittances are a crucial source of foreign capital for many developing countries. Unlike other flows of private capital, remittances have remained resilient throughout the pandemic. As economics across the world continue to recover, remittances continue to play a vital role in helping countries build resilience and drive economic growth.
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