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Omar Qureshi

The Express Tribune

Published Date: Jun 1, 2020

Pakistan’s inflow of remittances under threat

KARACHI: The crude market crisis for the six-member Gulf Cooperation Council (GCC), coupled with the coronavirus outbreak, has caused a two-faceted problem for Pakistan, which has already been struggling to spur economic growth and curtail runaway expenditures.

Owing to growing joblessness for Pakistani expatriates in the GCC countries, Islamabad is set to lose a big chunk of remittances from the Middle Eastern states. At the same time, it has to devise a strategy to accommodate the returning Pakistani workforce from overseas in the domestic job market.

Wajid Khan, an expatriate Pakistani living in the United Arab Emirates (UAE), was laid off in the wake of an economic slowdown caused by the coronavirus pandemic coupled with the sharply contracting economy following the crash in international oil prices.
Many Gulf countries largely bank on earnings from oil sales in the international market.

Talking to The Express Tribune, Khan disclosed that he worked in the sales department of a multinational company in Ajman, which resorted to job cuts after orders for goods dropped on the back of a weakening economy.

Earlier, Khan managed to send back home around 2,000 dirhams per month to his family but the remittance flow has now come to a standstill.

Being unemployed for a substantial period of time now, Khan’s savings have evaporated and after seeing no way out of the quagmire, he has registered for going back to Pakistan.

He is pleading with the government of Pakistan to expedite the process as he fears he will be left with not a single penny to fend for himself in a foreign country.

Talking about his employment plans following arrival in Pakistan, Khan emphasised that he may start a very small business in his hometown to support his family and to ensure the earnings keep flowing.

Khan is just one of thousands of Pakistanis who have been removed from job in the GCC – which comprises Saudi Arabia, the UAE, Bahrain, Kuwait, Qatar and Oman – and have no option but to return to the country to seek employment.

At the same time, Pakistan’s remittances from Middle Eastern countries are expected to fall in the coming months with experts claiming that the dent will be a few billions of dollars.

Remittances have a huge share in the country’s foreign exchange earnings and they are part of the balance of payments data, announced by the State Bank of Pakistan every month.

In April 2020, Pakistan received remittances worth $1.79 billion, out of which inflows from GCC countries amounted to $958.51 million.

“My father, formerly an employee of an oil company in Saudi Arabia, has been unemployed for several months due to the global oil price slump,” said Saad Saud, who is a student at a university in Karachi.

“The Covid-19 outbreak in Saudi Arabia has made it more difficult for him to get another job soon.”

He added that his father sent Rs125,000 per month, which “he still continues to send while searching for a new job”.

Saud stressed that his father would keep searching for the job in the kingdom as long as it was possible for him to stay there.

What experts say

Sustainable Development Policy Institute (SDPI) Executive Director Abid Qaiyum Suleri told The Express Tribune that crude oil prices began dropping way before the coronavirus hit the GCC countries because the global oil demand had been on the wane, which caused the initial slowdown. He pointed out that growing joblessness in GCC countries did not reflect in the latest remittances data (for April 2020) because of Eidul Fitr in May, before which Pakistanis settled abroad send more money back home.

“The inflow of remittances remains high in Ramazan and this trend has continued in current year as well,” he said.

Suleri, however, held the view that remittances would receive a hit in the next one to two months. Pakistan’s remittances would fall $5 billion in the coming months solely because of the slowdown triggered by the coronavirus around the globe, he projected.

Talking about layoffs in GCC countries, the SDPI executive director revealed that Indian and Bangladeshi workers were also being laid off, hence, the trend for regional countries was more or less the same.

“Oil prices have crashed and GCC economies are suffering, hence, it is easy to predict massive layoffs at such a time,” he remarked.

Talking about Pakistan’s capacity to accommodate the returning workers, he said Pakistan was not in such a state to do so because the country’s economy was already slowing down.

“We are moving towards recession, we cannot create jobs at this time,” he said. “It will take some time to overcome the losses borne on account of lockdown and to completely reopen the economy.”

He voiced fear that if coronavirus cases continued to rise, another lockdown would be imposed, which would further dampen the country’s outlook and deal a blow to the economy.

“There is a looming uncertainty and nothing can be predicted with complete certainty,” he commented.

Suleri pointed out that Pakistani workers in GCC countries were mostly employed in construction and transport sectors. Both the sectors are in a deteriorating condition in Pakistan, hence, it will be difficult to accommodate the returning workers.

“However, if these workers have undergone professional training in the GCC or if they have entrepreneurship skills, they can start their own small business, which will help the economy by providing employment,” he said.

Overall, the world economy is expected to lose $8.5-9 trillion in remittances on account of the coronavirus pandemic.

Suleri added that the drop in remittances would cause a dip in foreign exchange reserves of the country as well. On the other hand, he voiced concern, the rupee would weaken against the dollar.

Though debt rescheduling will provide Pakistan some breathing space for the time being, the country may not be in a good position when the deadline to repay the debt approaches.

An official heading the remittances department of a top bank said there was a slight impact of Covid-19 on April remittances, rather it was negligible, hence, it was not felt by the economy.

According to him, remittances for May will only fall slightly because Pakistanis were remitting higher sums before Eidul Fitr, regardless of the state of employment.

“Remittances for May 2019 stood at $2.3 billion. Overall, remittances may fall to $18-19 billion in FY20,” he said. “It will be due to the slowdown caused by Covid-19, however, this still does not depict the true picture because expatriates were somehow sending money to their families in Pakistan before Eid.”