ISLAMABAD: Overseas Pakistanis living in Dubai and Oman contributed significantly in increasing foreign remittances to the country in the second half of the current fiscal year.
“Another source of getting enhanced volume of remittances was the foreign trade,” a source in the Finance Ministry told Customs Today on Saturday.
“Remittance growth in first quarter of the current fiscal year came from the United Kingdom and Saudi Arabia, but most of the increase during second quarter of the current fiscal year from Dubai and Oman,” the source said.
The source said that the consistent growth in remittances reflected a shift from informal to formal avenues to remit funds from overseas Pakistanis and overseas workers were the main source of economic growth of the country after exports, resultantly, country gained growth in the current fiscal year, which was the highest one in last six years.
The source hoped that prevailing economic growth would help lead to prosperity through poverty alleviation and said that the government and State Bank of Pakistan (SBP) had focused on promotion of formal channel for international remittances through banks and different money transfer services under the Pakistan Remittances Initiatives (PRI).
“The inflow of remittances during August from Saudi Arabia, UAE, USA, UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU countries were high,” the source said, adding that the remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries were also significantly higher than previous fiscal year.
To a question about possible reasons for significant increase in the remittances, he said that this fiscal year marked not only a return to the last decade’s double-digit yearly growth pattern, but it also looked set to cross record volume.
The source said that the long-running remittance momentum that saw inflows jump had amazed policymakers and researchers alike.
“For one odd reason or another, Pakistan has had a history of swaying away from the International Monetary Fund (IMF’s) programme right in the middle and it happened in the Musharraf era when foreign investment inflows were pouring in and the political cost of pushing through tough structural reforms prescribed by the fund were perceived to be higher than its benefits,” the source named first reason for remittance growth.
The source said that the Asian Development Bank (ADB) reported that macroeconomic and security challenges continue to weigh on Pakistan’s economy as investment remains low amid a continuation of energy shortages.
“Despite facing stiff competition from their conventional peers, full-fledged Islamic banks have been the movers and shakers of the domestic Shariah-compliant banking industry,” the source said, adding that Pakistan’s Islamic banking sector comprised of five full-fledged Islamic banks (Meezan bank, Bank Islami, Burj Bank, alBaraka and Dubai Islamic Bank) which boast a 58 percent share in branch network and 63 percent in Islamic banking assets of the overall Islamic banking industry and it had also allured overseas Pakistanis to send remittances through proper banking channels.
Moreover, fourteen conventional banks are also milking the lucrative and high-yielding banking avenue with their Shariah-compliant branches and sub-branches, the source added.
Similarly, the source said that an increase in number of Pakistanis working abroad, the economic recovery in the Gulf region and a decline in the cost of sending remittances had also been a solid ground for growth in remittance.
“Increased cost of living in the country, continuous tightening of antimony laundering policies, greater involvement of domestic Islamic banks, and other small-sized banks in the remittance business are the main reasons,” the source said, adding that half of the reasons cited above concern the sender-receiver dynamics of the remittance loop.
“It seems that the ‘medium’ between senders and receivers has also undergone significant change, one which remains under-reported and under-appreciated and not duly acknowledged despite the fact that collaboration between local financial authorities and financial intermediaries like scheduled banks and international money transfer operators (IMTOs) has helped in propelling official inflows,” the source observed.
As the tide of Islamic banking sweeps across local financial sector, remittance inflows may also increase with it and State Bank of Pakistan had pointed out that the share of Islamic banks in total year-on-year increase in home remittances.
