1. FOREIGN REMITTANCES
AND THEIR IMPACT ON
THE ECONOMY OF
PAKISTAN
A Study Lapsing 1947-2014
162 Muhammad Umair
190 Ijaz Ahmad
205 Muhammad Awais
155 Sajjad Husain

2. Remittances Defined:
 A remittance is a transfer of money by
a foreign worker to an individual in his or her
home country. Money sent home by migrants
competes with international aid as some of the
largest financial inflows to developing
countries.
 A sum of money sent in payment or as a gift

3. Significance Of Remittances:
 According to World Bank estimates, remittances totaled US$ 414 billion in
2009, of which US$ 316 billion went to developing countries that involved
192 million migrant workers.
 2012: 550 Billion in the world where Pakistan’s share 14 Billion.
 Top Two Nations in this regard are India(71B) and China(60B).
 For some individual recipient countries, remittances can be as high as a
third of their GDP.
 As remittance receivers often have a higher propensity to own a bank
account, remittances promote access to financial services for the sender
and recipient, an essential aspect of leveraging remittances to promote
economic development.
 According to some social scientists, remittances have social significance
that extends well beyond the mere financial dimensions

4.  The World Bank and the Bank for International
Settlements have developed international
standards for remittance services.
 In 2004 the G8 met at the Sea Island Summit and
decided to take action to lower the costs for
migrant workers who send money back to their
friends and families in their country of origin. In
light of this, various G8 government developmental
organizations, such as the UK
government's Department for International
Development (DFID) and USAID began to look
into ways in which the cost of remitting money
could be lowered.

5.  In September 2008, the World Bank established the first international
database of remittance prices. The Remittance Prices Worldwide
Database provides data on sending and receiving remittances for over 200
"country corridors" worldwide. The "corridors" examined include remittance
flows from 32 major sending countries to 89 receiving countries, which
account for more than 60% of total remittances to developing countries. The
resulting publication of the Remittance Prices Worldwide Database serves
four major purposes: benchmarking improvements, allowing comparisons
across countries, supporting consumers’ choices, and putting pressure on
service providers to improve their services.
 At a July 2009 summit in L'Aquila, Italy, G8 heads of government and states
endorsed the objective of reducing the cost of remittance services by five
percentage points in five years. To drive down costs, the World Bank has
begun certifying regional and national databases that use a consistent
methodology to compare the cost of sending remittances.

6. Overview:
 Several European countries, for example Spain, Italy and Ireland
were heavily dependent on remittances received from their
emigrants during the 19th and 20th centuries. In the case of Spain,
remittances amounted to the 21% of all of its current account
income in 1946. All of those countries created policies on
remittances developed after significant research efforts in the field.
For instance, Italy was the first country in the world to enact a law to
protect remittances in 1901 while Spain was the first country to sign
an international treaty (with Argentina in 1960) to lower the cost of
the remittances received.
 Since 2000, remittances have increased sharply worldwide, having
almost tripled to $529 billion in 2012. In 2012, migrants from India
and China alone sent more than $130 billion to their home
countries.

7. Mode of Remittances:
 Authorized Dealers should normally avoid
issuing drafts in cover of outward remittances
whenever remittance can be made by T.Ts, or
M.Ts, etc. Where, however, the normal means
of transfer is likely to result in unnecessary
hardship or inconvenience to the
remitter, drafts may be issued in the name of
the beneficiaries of the remittance but such
drafts should be crossed by the issuing bank
as "Account Payee only".

8. Inward and Outward Remittances:
 The term 'inward remittance" means purchase
of foreign currencies in whatever form and
includes not only remittances by draft, but also
purchase of travelers cheques, drafts under
travelers letters of credit, bills of
exchange, currency notes and coin etc. Debit
to bank‘s non-resident Rupee accounts also
constitutes an inward remittance.

9.  The term "outward remittance" means sale of
foreign exchange in any form and includes not
only remittances by T.Ts, M.Ts, drafts etc., but
also sale of travelers cheques, travelers letters
of credit, foreign currency notes and coin etc.
Outward remittance can be made either by
sale of foreign exchange or by credit to non-
resident Rupee account of banks' overseas
branches or correspondents. Authorized
Dealers may sell foreign exchange for
approved transactions

10. Remittances and Pakistan:
 First influx towards UK and Western Europe in
the late 50’s due to war. Mostly unskilled and
Manual Labour.
 2nd influx in 1973 in the wake of Oil price
shock. $107 Million in 1971-72 which was low
keyed growth. 1982-83 peaked to $ 2886
Million i.e 9% of GNP. Total Imports then were
$5616 Million and thus exceeded the
merchandise exports of nearly $ 2672 Million.

11.  2000-01: saw a declining trend in remittances
with a migration trend.
Causes:
i. Steep decline in Oil Prices.
ii. Competition from India and SK in Skilled
labour and Bangladesh, Sri Lanka in
unskilled and semi skilled.
iii. The Trend was specially evident when it
came to female labor force

12.  Social and cultural freedom gave boast in
Remittances to Philippines, Bangladesh and
Thailand in Female Labor Force as Pakistan
was unable to compete with the structural
changes taking place in the world economies.
 Post 9/11 period has seen a 2nd resurge of
Remittances. More than $8 Million in 2009-10.
43.4% of total exports and 22.4% of Total
Imports. BOT was a negative by $17 Billion
and came down to about 46%.

13.  1998: Fall in Remittances due to confidence fall due to
carrying out of Nuclear Tests in May 1998.
 2010-11: 11,200.97 Million with $890.42 Million in the
month of September and 924.92 Million in November.
 2011-12: More than $13 Billion which was the highest
for our Nation in the history. $13,186.58 Million during
the last fiscal year that ended on June 30, 2012.
Growth of 17.73 %.
$1 Billion in the last 10 months.

14. GDP and Remittances Trend:

15. Province Wise Stats:

16. Skill Wise:

17. Country Wise Stats:

18. Reasons for Remittances:
 Unemployment
 Poverty
 Attraction of Higher wages
 Better amenities of life
 Better education opportunities
 Political Freedom

19. Advantages:
 Budget Deficit Bridging
 Trade Deficit
 Foreign Reserves
 Redistribution of income and wealth
 Increase in consumption ( last ten years 62%)
 Increase in Savings (16%)
 Increase in Investment (20%)
 Impact on BOP
 Impact on GNP
 Standard of Living improved

20.  It should be mentioned here that remittances
only prove a temporary breathing space to
economies under stress but their continuation
over time is never guaranteed.

21. Disadvantages:
 Brain Drain: Professional and skilled people
leave the country causing loss in productivity.
 Inflation
 Demonstration effect
 Failure in adjustment in new social system
 Social and Psychological and Sexual Effects

22. Conclusion:
 Foreign Remittances are important for a
Nation. They help to bridge the gap in BOP but
this support is not mostly transitory. An
Economy can’t rely on ‘em solely as their
continuation over time is not guaranteed.
 Conversely, some economists are of the view
that they are essential for the developing
countries. In some cases even more than
official development assistance. As in case of
Pakistan where they are even more than FDI.

23. Policy Implications:
 By raising the level of education in the country.
Academic as well as skilled.
 Investment in Human Capital
 Training of Labour Force.
 Removing of Economic Barriers.
 Attitudinal Changes. Social and Psychological
improvement.
 Political Changes and Diplomatic Attitude.
 Terrorism.
 Note: Labour Force Restrictions due to Health
concerns.