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Foreign remittances remain a major source of earning forex for the country

Published on 11th Apr, Edition 15- 2016


After persistent decline in the country’s exports, the foreign remittances are now intend to be a major source of forex earning for the country. Efforts are underway at different levels to produce trained human resource, can serve abroad and earn precious forex for the country. In this regard, TEVTA, NAVTEC and other training institutions are playing lead role.

Overseas Pakistani workers remitted $12,714.57 million in the first eight months (July to February) of FY16, showing a growth of 6.07 percent compared with $11,986.44 million received during the same period in the preceding year, official sources told PAGE.

During February 2016, the sources said the inflow of worker’s remittances amounted to $1,516.39 million, which is 3.65 percent higher than January 2016 and 6.74 percent higher than February 2015.

The country wise details for the month of February 2016 show that inflows from Saudi Arabia, UAE, US, UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU countries amounted to $471.94 million, $317.12 million, $212.19 million, $174.66 million, $191.75 million and $28.48 million respectively compared with the inflow of $453.41 million, $319.1 million, $189.63 million, $180.02 million, $168.22 million and $24.17 million respectively in February 2015.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during February 2016 amounted to $120.25 million together as against $85.99 million received in February 2015.

Prime destination

Over the years, analysts believe that Gulf has emerged as the prime destination from where we receive our remittances, accounting for nearly $12 billion per annum or about 5 percent of our total GDP. According to them, the importance of home remittances in our external account equation has increased in recent years amidst eroding competitiveness and declining exports.

Nearly 25 percent of the total foreign exchange reserves held by the commercial banks have a weight age of approximately 50 percent in shape of savings based on the annual remittance-cycle.

“If the growth trend of remittances continues while coinciding with a declining trend in exports of our manufactured products, the remittances in effect will soon become our main ‘export income’, they said. In fact, most countries with non-resident workers and professionals abroad are already finding innovative ways to harness the very networking and linkages of their foreign workers in order to establish win-win synergies for the home country, they added.

Legal experts told this scribe that the income tax laws provide immunity to taxpayer in respect of non-offering of explanation about the nature and source of any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and certificate from such bank is produced to that effect.


The Protection of Economic Reforms Act, 1992 provides: “Immunity shall not be available to citizens of Pakistan residing in Pakistan and to firms, companies and other bodies registered or incorporated in Pakistan in respect of any new foreign currency account opened or deposits created on or after the 16th day of December, 1999 or to any incremental deposits thereafter in an existing foreign currency account.”

It also provides opportunity to person refraining from being enrolled/included in the tax net and making true/fair declaration of income.

Under the Income Tax Ordinance, 2001 a taxpayer does not have to offer explanation about the nature and source of any amount of foreign exchange remitted from outside Pakistan through normal banking channels.

Facilitation desks

On the other hand, the government, as a gesture of acknowledgement towards the overseas Pakistanis for contributing billions to the national economy, has established one-window facilitation desks at different airports to timely address their problems.

The facilitation desks are providing instant relief to the expatriates at airports. Seven one-window facilitation desks have been established and successfully functioning at the Islamabad, Lahore, Karachi, Peshawar, Quetta, Sialkot and Multan airports.

Workers’ remittances to Pakistan are increasing by the year. It has been observed that remittance flows to Pakistan have shown remarkable resilience as compared to foreign direct investment during and after the global crisis. In the recent past, remittances have become an important source of foreign exchange inflows into developing countries.

Half of the top ten recipients of remittances in the world are in Asia, including India, China, Philippines, Bangladesh and Pakistan.

Remittances have become a backbone for sustainable growth of the Pakistani economy. More than seven million Pakistanis have been placed abroad since 1971, out of which approximately 96 percent of the total is concentrated in six countries in the Middle East – namely Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Bahrain and Qatar.

About 90 percent of the total are located in Saudi Arabia, the United Arab Emirates and Oman alone.


The money sent by migrant labor directly augments the income of the migrant’s household. The benefits that households derive from remittances depend on how and where they spend remittances: most are now spending less money on consumption goods and more on investment goods like education, housing, cars and other luxuries.

Remittance income through legal channels helps pay for essential imports and reduce the pressure on our balance of payment position.

Successive governments have provided considerable incentives to exporters as they fuel the domestic economy through a contribution to national income, in providing employment and also provide support to the domestic currency through strengthening the balance of payment position.

On the other hand, overseas Pakistanis are to be facilitated in real term. Although the Pakistan government introduced a foreign exchange remittance card which allows the following benefits:

1- Special handling at arrival and departure at airports. However, the existing set-up is so mismanaged with no enforcement of forming orderly lines that it remains an ordeal clear immigration and customs.

2- Free issuance and renewal of passport but only for one year after issuance of the card.

3- Duty card will be issued and its points would depend on the amount remitted per year and would be like a frequent flyer points namely allow the holder to purchase from duty free shops and get special handling.

Remittance income through legal channels must rise further if the pressure on the balance of payment position is to ease and thereby strengthen the rupee.

The government needs to encourage remittance through the legal channels. For capital deficient countries, like Pakistan, workers’ remittances are considered to be an important source of foreign exchange. These remittances have a positive impact on Pakistan’s economy through improved balance of payments position and reduced dependence on external borrowing.

One of major challenges for our policymakers is to find substitutes to reduce reliance on remittances, so that the country is capable of coping with the associated risks if inflows slow down.


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