Raza Khan

The expatriates need to invest their remittances in Pakistan rather than spending them on consumptions to create more jobs and enhance the economic activities, suggest experts while talking to WealthPK. Pakistan has a large diaspora around the globe. According to an estimate, nine million Pakistanis live and work in various countries, and most of them support their families and communities back home through remittances. “Remittances are a crucial component of our economy that sees the foreign exchange reserves depleting due to debt servicing,” Dr. Sajid Amin Javed, Deputy Executive Director at the Sustainable Development Policy Institute (SDPI), told WealthPK.   With exports heavily lopsided against the huge imports, Pakistan relies on the remittances to meet its foreign exchange needs, he said, adding that the overseas Pakistanis make substantial contribution to the country’s foreign exchange reserves in shape of remittances.

Sajid said remittances were the only way the expatriates could contribute to the economy, particularly when the country was going through an unprecedented economic crisis. “Despite a steady increase in remittances during the last two decades, the growing current account deficit remains a major macro-economic concern for Pakistan. The high-income households are using remittances on buying imported goods which result in the growth of imports,” Sajid added. He said Pakistan received the highest number of remittances – around $31 billion – during the Fiscal Year 2021-22, but still, it posted a $17.4 billion current account deficit the same year.

“Pakistan’s economic problems are far bigger and cannot be resolved by just sending money back home by the expatriates. The expatriates need to invest in the country to generate more economic activities and jobs besides increasing their own profit,” he suggested. Spending remittances only on consumptions doesn’t help the economy, Sajid added. “The most effective use of remittances would be to use them for creation of well-paid jobs and to expand the production capacity of the economy. At the moment, the remittances are being used to finance consumption of households, investments in plots and the bond market in Pakistan,” said Sajid. “The biggest problem of our economy is its inability to create well-paid jobs. This is directly tied to the limited production capacity of the economy,” he maintained.

 Dr Farrukh Saleem, an economic expert, said that overseas Pakistanis need to go beyond the traditional business model while making investment in the country. He suggested that the expatriates should consider investing their capital in the cooperatives owned and managed by the workers. These enterprises are different from the traditional companies where workers only work for the owners,” he said. “These enterprises allow the local community and workers to get empowered and to make their economic decisions in a way which helps them and their communities,” Saleem elaborated.

 “These enterprises directly empower the communities and provide employment to the local people. This would also solve the grievances of local communities in the underdeveloped areas that they don’t get jobs despite investment in their regions,” Saleem maintained. “The productivity gains of these enterprises are going to be distributed in an equitable way among the workers and local communities. This will also address the issue of uneven development and rising inequality,” Saleem said.    “These enterprises will also solve the incentive problems of workers. Since the workers themselves get to decide how to distribute or invest profit, it will enhance the productivity of the companies,” he said.

Credit : Independent News Pakistan-WealthPk