By Asad Rizvi
September 15, 2020 (MLN): Remittances for the month of August hitting $ 2.095 billion is a very encouraging sign. This is a good number, clearly hinting that the uptrend remains intact.
To understand why August remittances figures are supportive of continuation of upward tendency, the interesting fact to note is that in the month of July, out of total 31 days there were total 23 working days.
While in August, there were a total 20 working days, due to 5-Saturdays and 5-Sundays. Pakistan Day was celebrated on Friday, August 14.
More importantly the historical trend suggests that after the Eid ul Azha holidays, remittances dried up. Drop in August remittances number is also because overseas Pakistanis had sent excess money ahead of Eid al Azha. This is why the inflow always slows down for the next 7-10 days after Eid Holidays.
I do not see a steep drop of 20% of Global Remittances as projected by the World Bank. In 2019, it touched the highs of $714 billion, which means as per their call, remittances should decline to $ 571 billion in 2020. I disagree with the number.
I still see Pakistan as the top recipient country. Though, lower oil prices increases the risk of more job losses for the Gulf Economies.
But there is a difference, as the economic circumstances differ from one country to another country and from one continent to another continent.
As compared to Asia and Africa, remittance outflow from Europe and America is mostly officially documented and therefore legalized because they are processed through banking channels. Whereas, in Asia and Africa, the cause of parallel market activity is due to weak structural support. Families and beneficiaries live in far flung rural areas and they face difficulty in reaching or having access to bank branches .
However, after COVID-19, lockdown, stay and work from home, mobility and travel restrictions have severely impacted parallel market activity.
FATF is getting tougher and tougher everyday. Last week Saudi Monetary Authority announced few changes to regulate the money exchange business to combat money laundering and funding of terrorism. Hence, I see a gradual shift in stance in the Gulf region, which will encourage businesses via official channels.
This is why I have every reason to believe that remittances in Pakistan will not fall as projected by the various global agencies and the size of remittance will gradually increase.
Oh yes, if in a short period, one million workforce is sent back home from the Gulf region, then it may have a negative impact on remittances. But again we need to count those getting new jobs. Last year (2019) half a million Pakistanis got employment in parts of Europe and Middle East.
(The writer is former Country Treasurer of Chase Manhattan Bank)
Disclaimer: The opinions in this article are the author’s and do not necessarily represent the views of Mettis Link News (MLN)
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