Uzair bin Farid

Pakistan falls in the fourth place among the top 10 remittance recipient economies of the Asia-Pacific region, according to the Asian Economic Integration Report 2023, published by the Asia Regional Integration Centre of the Asian Development Bank (ADB).According to the report, Pakistan only falls behind India, China and the Philippines in receiving remittances.

The report states that the onset of the Covid-19 pandemic incentivised the Pakistani government to open formal channels for migrant workers so that they could send their monies through them. They included the Sohni Dharti Remittance programme of 2021 and the Roshan Digital Account.The Sohni Dharti Remittance initiative allowed users to win cash-convertible points every time they made a remittance transaction.

In 2021 alone, the remittance inflows to Pakistan were recorded at $31.1 billion, which represented 9% of the Gross Domestic Product (GDP), whereas in 2020, the remittance inflows stood at $26.1 billion.The report highlights the need to “harness remittance resilience through vigorous policy approach.”

The cost incurred by the migrant worker to remit money to his family members back home should be as low as possible.The report states that the cost of remitting money should not be greater than 3% of the total amount being remitted, which is one of the Sustainable Development Goals (SDGs).However, in the Asia Pacific region, this cost is very high, up to 6% of the amount being remitted.

The report lays out that it is important to improve the remittance infrastructure with the integration of digital methods and channels so that the reliance of poor migrant workers could increase on formal channels of sending money. The report also calls for changes in the legal and regulatory environment that is governing the remittance market so that “inter-operability” of cross-border remittances could be improved.

Similarly, the report also stresses the need to introduce financial products and “green finance” to channel the remittance money through formal channels in order to increase welfare and improve resilience. The report also highlights the need for financial literacy of the recipient people of remittance money. It states that 70% of the remittance money goes into consumption while the rest of the 30% goes into savings or investments.

These savings and investments, however, are not enough to be invested in productive sectors. Therefore, it is incumbent upon the government to undertake financial literacy programmes to make sure that people are utilising their remittance money in the optimal way possible. The report says that the struggling economies of Pakistan and Sri Lanka are cushioned through the remittance money coming in from the diaspora working abroad. It calls for improved measures and regulations to attract more and more remittance money through the formal channels so that people’s reliance on hawala-hundi could be ended, fuelling the “black economy.”

Credit: Independent News Pakistan-WealthPk