04 Sep 2024
With an increase in the number of Pakistanis working in foreign countries, the inward remittances to Pakistan are fluctuating. A Pilot Guides report said that over 9 million Pakistanis are living and working abroad. They earn a living and send money online to Pakistan to offer financial support back home.
As the number of migrants fluctuates, so does the quantum of inward remittances. Do you know what is the fallout of fluctuations in the number of migrants and the quantum of remittances? Well, the first fallout is that the government has to make adjustments in its policies regulating the flow of inward remittances. This blog casts a glance at how the government is regulating inward remittances now and what the future looks like.
Currently, inward remittances to Pakistan are witnessing a rise in the quantum, but the rise is not guaranteed to remain persistent. A report by The Express Tribune stated that inward remittances stood at $2.39 billion in January 2024 alone.
The country is undergoing an economic crunch. It is one of the reasons that more and more people are leaving the country for greener pastures. This, in turn, leads to the country’s growing dependence on remittances. This has forced the government to create policies to:
· Regulate the flow more efficiently
· Incentivise Pakistani migrants who send money to Pakistan online from abroad
· Promote the use of legal channels to send remittances back home
· Ensure safety and create investment opportunities
The government of Pakistan has taken several initiatives to this effect in the past with varying degrees of success and effectiveness. Some of the most effective measures are listed below, with the PRI being the jewel in the crown.
You know that there are two prime ways of transferring funds across borders. One is legal and the other is illegal. Given that the legal channels are regulated and are thus taxed, the people look for cost-effective ways to transfer funds.
It was in this context that the government of Pakistan launched the Pakistan Remittance Initiative (PRI) back in 2009. This initiative was the result of collaboration between the State Bank of Pakistan (SBP), the Ministry of Overseas Pakistanis, and the Ministry of Finance. The initiative aims to:
· Facilitate the flow of inward remittances
· Create more investment opportunities
· Ensure the safety and security of inward remittances
As a result of this initiative, the Pakistani diaspora community abroad has received several financial benefits as promised by the initiative itself. Over the years, however, you will find several tweaks in the policy document of PRI to cater to the changing trends.
Another essential measure the Pakistani government has taken to effectively regulate the flow of inward remittances is to crack down on illegal channels. You know that your money transfer to Pakistan through legal channels is regulated, which means it is taxed.
But when you use illegal channels like Hundi and Hawala, you get tax exemptions to a specific limit. It is only an apparent financial benefit that comes at the cost of several challenges. The biggest of these challenges is the risk of getting fleeced. Because these channels are not regulated and, therefore, operate outside the ambit of the law.
The government of Pakistan is working on establishing friendlier ties with countries with significant diaspora populations belonging to Pakistan. The focus is on the Gulf countries, the USA, the UK, and Middle Eastern countries, among others.
These cooperation efforts between Pakistan and other countries are aimed at making it convenient for Pakistani expatriates seeking jobs and employment opportunities abroad. These areas in focus include job availability, job security, and protection by foreign governments.
The government of Pakistan expanded its efforts to facilitate the immense flow of inward remittances by supporting legal channels for operation. You know that the existing remittance paraphernalia is unable to cater to the rising quantum of inward remittances.
Therefore, the government is inviting innumerable financial institutions, such as banks and online remittance transfer service providers, to establish their offices across the country. This measure has helped a) expand the existing paraphernalia and b) cater to the increasing inward remittances.
Different reports have revealed that around 2 million Pakistanis have migrated abroad in 2022-23 alone. The teetering economy and high rates of unemployment in the country are responsible for this huge migration in such a short time.
Therefore, as the number of migrants increases, so is the quantum of inward remittances. Certain factors, such as the rising cost of living in countries like the UAE and Saudi Arabia, are said to be responsible for a decline in remittances, but overall, the trajectory is high, showing an increase in the upcoming months. The government, however, is taking the following measures to direct the future of remittances to Pakistan.
Taxing inward or outward money is a significant challenge for the smooth flow of remittances anywhere in the world. Pakistan is no exception. It forces people to find illegal ways to transfer funds. Therefore, the government is offering tax relaxation to remittance operators so they can offer cost-effective and better deals to remitters and recipients.
Learn HERE more about the future of remittances to Pakistan.
Leveraging the latest technology in any service and operation is critical to deriving optimal benefits. The government is ensuring through its regulatory bodies that the remittance operators integrate technology into their operations. It will help them offer services smartly and cost-effectively.
Market competition is the key to offering more refined and better services. Therefore, the government is encouraging a healthy yet intense market competition in the remittance industry by inviting more and more service providers.
When it comes to your hard-earned money, you are primarily concerned about safety and security. Even a slight thought of surrendering your money to a stranger is enough to scare you. So, it is on the watch of the government of Pakistan and its regulatory bodies that the service providers are mandated to offer increased and unbreachable safety and security of funds and transactions.
The government is creating multiple investment opportunities for the remitters and their families. This is in line with the PRI whose details have already been given above. Migrants and their families will have the opportunity to invest their capital in several fields and also will get relaxation in taxes and other regulatory compliance.
When you make an online money transfer to Pakistan, you pay a certain amount in fees and currency conversion charges. This is a recurring process for which you make repeated payments. So, find a service provider that offers you cost-effective deals in this regard.
A little online search can easily lead you to a service provider that not only charges you a low fee but also offers live and market-competitive currency exchange rates. This can compensate you for the small fee you pay. You also happen to deliver funds to Pakistan in less than 7 seconds from anywhere in the world. Can you think of a better deal?
The burgeoning population of Pakistan has burdened the country beyond its limits and endurance. The teetering Pakistani economy has only added fuel to the fire as millions are being pushed under the poverty line as they cannot find employment. Therefore, Pakistanis are traveling abroad to find reasonable employment opportunities.
The Pakistan Remittance Initiative (PRI) was launched in 2009 as a result of deep collaboration between the State Bank of Pakistan (SBP), the Ministry of Finance, and the Ministry of Overseas Pakistanis. This initiative was launched because the country began to depend immensely on inward foreign remittances.
The Pakistan Remittance Initiative (PRI) has benefited Pakistani migrants and their families in multiple ways. Through PRI, the safety of the funds and transactions is ensured, the flow of inward remittances has become smooth, the government of Pakistan is creating multiple investment opportunities, and the legal channels are being promoted.
The current landscape of inward remittances is fairly encouraging in Pakistan. The government has launched the PRI and has been tweaking it since its launch in 2009 to cater to the evolving needs and requirements, a stern crackdown on illegal channels such as Hundi and Hawala is ongoing, legal channels are being promoted, and friendlier relations are being established with foreign countries to protect and facilitate Pakistani migrants abroad.
The future directions for the flow of inward remittances to Pakistan seem positive. The government is offering tax incentives to remittance operators, creating healthy yet intense market competition, overseeing and regulating the integration of technology into remittance services, offering increased safety, and creating multiple investment opportunities.
Resource(s)
· Pakistani Diaspora
(The Pakistani Diaspora - PILOT GUIDES)
· Inward Remittances in January 2024
