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Tuesday, July 16, 2024

Reality of Pakistan’s Economic Situation is hitting home

Recent months the government is under pressure on the large foreign loans it is taking out and questions of how the country will pay these back have arisen again and again. Now the latest numbers have come out on remittances and they paint an even scarier picture.

The State Bank of Pakistan (SBP) reported on Friday that remittances fell 2.5 percent to $12.36 billion in the last eight months (July-Feb) against an increase of 5.76 percent in the same period a year ago when they were $12.68 billion.

The SBP report shows remittances declining month on month for the past eight months. Most of this decline is coming from GCC economies as they have seen declining growth as oil prices have collapsed the last couple of years. Currently, Brent oil is currently around $51, it reached lows of $28 at the beginning of 2016, after remaining at levels over $100 since 2012.

Read more: Pakistan’s expected debt to be $110 billion by 2020

The GCC economies are not just hit by excessive supply of petrochemicals in the global market but also war in Yemen and the tense near-war situation in the Arabian Gulf with Tehran.

Saudi Arabia is the single largest country that sends back remittances to Pakistan and has the largest number of Pakistani overseas workers. The last 8 months has seen remittance inflows from Saudi Arabia decline 6.8 percent to $3.57bn. On the other hand, in the same period last year remittances from Saudi Arabia rose 7.8 percent.

Because of declining growth, Saudi Arabia has tightened its labor rules for overseas workers so as to provide jobs for local people. Over 2million Pakistanis reside in Saudi Arabia. But, under the stricter labor laws being implemented in the country, over 40,000 Pakistanis have been deported from Saudi Arabia past four months alone.

According to the Saudi Gazette, they were deported for “violating the rules of residence and work”.  A few months ago, the Federal Investigation Agency (FIA) had released a report, “Labor Migration from Pakistan: 2015 Status Report” showing that 131,643 Pakistani migrants were deported from Saudi Arabia between 2012-15.

Saudis are also increasingly reluctant to employ Pakistanis as casual labor for a number of reasons, terrorism also being one, but more importantly as better skilled labor for the same jobs is found from Bangladesh and India.

Read more: While Indians & Bangladeshis replace Pakistani workers in Gulf countries government of Pakistan sleeps!

Remittances have also declined from the United Arab Emirates decreasing by 1.6 percent to $2.76bn in July-Feb. The country is the second biggest contributor to Pakistan’s remittances and employer of Pakistani manpower abroad.

From the Western markets, remittances have declined from two of the major contributors: the United States and the UK. The United States provides the third largest remittances to Pakistan, but inflows from the country have been declining each month. They fell 7.8 percent to $1.51bn in July-Feb.

Another important source of remittances for Pakistan is the United Kingdom. Inflows from the UK declined 9.9 percent, which is the biggest year-on-year decline recorded by remittances originating from any country. Inflows from the UK fell to $1.44bn in the first eight months of 2016-17.

The government is already receiving budgetary support from IMF and other donor agencies and declining remittances will put further pressure on the country. Exports for the past several years are declining despite the fact the rupee has been devaluing during the same period.