- Massive Layoffs Migrant workers, Economic Contraction in most countries to hit Remittances to Pakistan
After witnessing significant increase in June-2020 and July-2020, Remittance Inflows to Pakistan are expected to slow down by atleast 10% in FY2021 in line with Emerging Markets Trend.
Pakistan has been witnessing Remittance Booms over past decade as Initiatives from the government to stream line Inflows bear fruits. Pakistan’s FY 2020 Remittances stood above $23 billion, a record high. The Remittance Figures seem massive as compared to FDI of the country which stands at meager $2.56 billion.
The Remittance Inflows remain a critical lifeline for Pakistan’s Economy as it provides support to its ever-increasing External Deficit. Pakistan’s Current Account deficit stood at $3 billion in 2020. The deficit is majorly covered by Foreign Remittances as it provides valuable FX reserves in the country.
However, the Remittance dynamics are changing as World struggle through the COVID19 Pandemic. Lock downs across the world have sent many businesses winding up as demand dries up. Migrant workers from Pakistan and other Developing nations remain jobless and hopeless of the future with intentions to return back.
Many analysts are of the view that returning migrant workers are sending back their savings before their actual return. This has created a remittance bulge in the past two to three months. Fitch Rating agency has noted that remittances to the Asia-Pacific region will drop 12% in the second half of 2020.
Furthermore, high taxes in Gulf countries along with Job cuts for foreign workers have led to large exodus from Middle East. The effects will start coming in upcoming months.
World Bank has previously predicted that Foreign Remittances will decline by 20% in next one year amid COVID19 induced lock down.
Pakistan has repatriated more than 250,000 stranded nationals from abroad, which primarily included Foreign Workers and Students.
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