Fact check: Pakistan’s remittance inflows in 9MFY20 were enough to easily cover its Balance of Trade deficit. This definitely suggest why Pakistan cannot endure decline in remittances. Inbound remittances have always provided cushion not only to our foreign exchange reserves but also to our current account deficit. Fact of the matter is that as a developing country, we rely heavily on our remittances to such an extent that our inbound remittances outweigh our textile exports.
But, given the oil crises in Saudi Arabia and other GCC countries and global pandemics in picture, Pakistan is likely to miss out on its initial intended target of $24bn by June 30. Inbound remittances from Saudi Arabia and other GCC countries account for 30% of Pakistan’s total remittances and that is going to be a huge blow for Pakistan. According to the Ministry of Finance, Pakistan’s inbound remittances will be short by 17% from its target. They expect that total remittances for FY20 will stand at around $20-21bn.
For these very reason, government and SBP has been very proactive in implementing the right set of policies to ensure that remittance inflows remain intact. In their recent policy announcement they have waived the withholding tax on remittances from 1st July onwards. They have also planned to launch the “National Remittance Loyalty Program” to give more incentives to diaspora to use the regular channel instead of kundi. Remember, a month earlier they increased the TT charges too. All these measures just suggest the importance of remittances to a top remitting country like Pakistan.
For a moment, think about the counterfactual and assume Pakistan without remittances. That would be disastrous for our foreign exchange reserves and current account deficit. Hence, it is pivotal for Pakistan to ensure smooth flow of remittances by ensuring to provide right set of incentives to the diaspora.