Crucial inflows

In all countries, the transfer of money from citizens working abroad to their home countries is a smooth process, with no political colour to it. But in Pakistan, a simple issue of a worker sending some money back to his/her family is seen as a political move. In 2022, after former prime minister Imran Khan failed to secure a vote of confidence, overseas Pakistanis reacted strongly to the extent that some threatened to stop sending funds to the country – which, experts say, are critical to maintaining Pakistan’s ever-depleting foreign exchange reserves. Between April 2022 and April 2024, there had also been a considerable dip in money invested in SBP-backed Roshan Digital Accounts (RDAs). Now things have started to change for the better. In May 2024, investments in RDAs were at their highest level ($215 million) since March 2022. Similarly, remittances sent by Pakistani citizens working abroad saw a notable increase of 10.7 per cent during FY2024. In June, workers’ remittances reached $3.2 billion, marking a 44.4 per cent increase from the $2.2 billion received in the same month last year. However, there was a 2.6 per cent decrease in inflows compared with the previous month. Analysts have attributed this particular increase to Eidul Azha, where people in large numbers send money to their families to buy sacrificial animals.

A 10 per cent annual increase in remittances is a good sign. It reflects people’s trust in official channels as most people had threatened to use hawala/hundi to teach the government ‘a lesson’. It also points to the growing trend of emigration from the country. In recent years, ever since the UAE introduced new visa categories and Saudi Arabia opened doors to emigrants under its Vision 2030, there has been a surge in the number of people moving to the Middle East to search for better job opportunities to send part of their foreign income back home in a bid to help their families. Initially, people would take a Pakistan-Middle East/EU-Pakistan route. They would have a retirement home in their homeland. With Canada opening to immigrants, the trend shifted. And capital moved there. While this trend is still intact, there have been sporadic incidents of reverse migration with most families coming back to Pakistan for multiple reasons.

The recent surge in remittances and RDA net flows indicates that Pakistan is regaining the trust of its population. Whatever the situation may be, threatening to withhold remittances or openly advertising the use of illegal money transfer methods is not a sane position to take. Pakistan has been lucky in the sense that those who migrated from here did not completely abandon it. But this attachment also requires people to stand by their country when things get tough. Since April 2022, successive governments have been able to save the country from imminent default. Pakistan’s local currency bonds, which lost their charm sometime back, are also attracting investors in large numbers. Sentiments and rumours play a big role in upending a relatively well-performing market. For a prosperous Pakistan, it is essential to stop interfering in the economy.