ISLAMABAD (Eshfak Mughal):- The Covid-19 pandemic and high inflation rate in the country are main contributors in the recent rising trend of overseas worker’s remittances followed by Government incentives.
An unusual increase in the overseas remittances was witnessed during the Covid-19 outbreak. According the State Bank of Pakistan, The overseas worker’s remittances had increased by 27 percent to $29.4 billion during the last fiscal year 2020-21. The overseas worker’s remittances also surged by 11 percent to $15.8 billion during the first half of the current fiscal year (2021-22) as compare to the same period of the fiscal year 2020-21.
Some commentators and studies say that the Covid-19, high rate of inflation, conditions of the Financial Action Task Force are main contributors in this increase in remittances followed by incentives announced by the Government in recent years.

Dr Waqar Ahmd, economic expert in this regard, he said that there is some reasons behind this increase. He said that inflation is also a factor that contributes for swelling in remittances. He said that it can be seen that inflation in the country put impact on the movement of remittances.
According to the Pakistan Bureau of Statistics, the inflation has been increased by 10 percent during the first six months of the current fiscal year as compare to the same period of the last fiscal year. The growth in remittances also was recorded at 11 percent during the same period.
There are also reports that the households or relatives demand more money from their overseas workers to meet the daily expenses, he added.
So, this is on demand increase in remittances in the country, Ahmed explained. He said that almost 15 percentage growth in portion of increase in remittances mainly due to inflation.

An informal avenue of remittances also squeezed during Covid-19 due to travel restrictions, Dr Waqar said.
He further explained that overseas workers prefer to bring their saving amount when they come to Pakistan on leaves. They also remit their money by hand through colleagues who are traveling to homeland. But, the travel restrictions during the pandemic has made limited or bared this avenue and overseas Pakistani’s shifted to banking channel for remittances, Waqar further stated.
Dr Waqar also believes that tax incentives by the government on remittances through banking channel also encouraged the overseas Pakistani workers for bringing them on banking channel.
While talking, the Former Secretary Finance Dr Waqar Masood said that the conditions of the Financial Action Task Force (FATF) played an important role to bring the workers on official channel for remittances from abroad. He said that Pakistan took stern actions against hawala and hundi and encouraged banking channel for remittances due to the FATF conditions.
It is important to mention here that Pakistan has fulfilled implemented successfully on 26 actions out of 27 suggested by the International financial watchdog on money laundering and terrorism financing worldwide. Pakistan is in grey list for the FATF since June 2018.
On the other hand World Bank has also says that although it is not clear that which reason contributed for increasing trend in remittances but some studies indicate that there are six reasons of increasing remittances in South Asia including Pakistan.
The World Bank has also been conducting studies to know about the reasons of rising trends in remittances in South Asia including Pakistan. According to a report, the WB believes that the portion of the recorded rise in remittances could represent repatriated savings of emigrants returning home after losing their jobs or not finding new opportunities.
The International lender also says that the remittances could have shifted from informal (unrecorded) to formal (recorded) channels. Part of the increase was just recording of flows unnoticed in the past in official statistics, not an actual increase. Before COVID-related travel restrictions, a significant share of remittances may have arrived through trips home by migrants or their trusted friends with cash in hand, gifts, etc. This was no longer an option during the pandemic.
The Bank also said that the dire economic conditions in South Asia could have encouraged greater giving by migrants’ close-knit family and community ties.
The shift to more formal channels was facilitated by the accelerated development of Financial technologies and digital transfer apps which have made the digital transfer of funds more accessible and cheaper per transaction, leading to an overall increase in remittances, the world Bank says.
Increasingly, policymakers want to encourage greater formal remittances. Pakistan and Bangladesh, which (along with Mexico) saw the highest surge in remittances in a sample of 45 developing countries, had recently introduced new remittance tax incentives. This one-off change may explain the high growth rate in 2020.

Host country transfers. Some migrants were able to access cash transfers offered by host country governments, which would allow then to send home higher amounts than normal (e.g., stimulus payments in the United States), the world bank believe.
It’s not clear which effect mattered more, let alone whether the increase in remittances is temporary or permanent. Much will depend on post-COVID migration policies in host countries, the World Bank says.
But as in other areas of policy, the pandemic has provided an opportunity to better reap the economic benefits of migrant work.

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