KARACHI: Financial experts have highlighted that Pakistan can witness a substantial increase in remittance inflows, potentially rising from $14.28 billion to $20 billion, by introducing incentives and innovative services for overseas Pakistanis working in Gulf countries.
According to the State Bank of Pakistan’s (SBP) statistics, remittance inflows from these Gulf countries declined to $14.28 billion in the outgoing financial year 2022-23, as compared to the $17.22 billion received in the financial year 2021-22, showing a significant year-on-year drop of 17 percent or a staggering $2.94 billion loss in foreign exchange for the country.
Experts believe that offering planned incentives to overseas Pakistanis will encourage them to utilize formal banking channels, potentially leading to a substantial rise in remittances within a short period.
Financial consultant and Chairman of Dellsons Associates, Ibrahim Amin, emphasized that despite an increase in the number of workers migrating to Gulf countries, remittances to Pakistan have been steadily decreasing. He suggested that in addition to Roshan Digital Accounts, banks should collaborate with fintech operators to attract remittances from overseas Pakistanis engaged in blue-collar jobs, using user-friendly apps and SMS-based services.
Amin further explained that remittance inflows have been shifting to non-banking channels, commonly known as Hawala/Hundi, due to higher exchange rate margins offered by them to the families of overseas Pakistanis in the country. This has resulted in a consistent drop in inflows through formal banking channels.
The withdrawal of the government’s incentive to banks, which included a 20 Riyal rebate as a remittance fee on remittances originating from KSA, may have also diverted some inflows to informal channels, Amin noted.
To reverse this trend, Amin suggested an aggressive approach involving collaboration between the government, private banks, and fintech operators to bring remittance inflows back to formal banking channels. He emphasized that innovative and digital services will play a crucial role in reclaiming the potential inflows of significant remittances from the Gulf region.
He further advised engaging overseas Pakistanis in the Gulf countries through regular seminars and meet-ups to create awareness and foster relationships with them. By informing them about the innovative services and incentives offered by banks and the government, overseas Pakistanis can be encouraged to use formal channels for sending remittances to their homeland.
Chairman Dellsons Associates shared that they are working with four major banks, including United Bank Limited, Habib Bank Limited, Bank Alfalah, and Dubai Islamic Limited, to incentivize Pakistani workers in Gulf countries to use formal channels.
According to data from the Bureau of Emigration and Overseas Employment, in 2022, approximately 0.741 million Pakistani workers migrated to Gulf countries, with Saudi Arabia alone receiving 0.541 million laborers from Pakistan. In the first half of 2023, 0.189 million workers also moved to Gulf countries from various cities of Pakistan.
Overseas Pakistani workers contribute significantly to remittance inflows, accounting for 52% of the overall inflows of $27.02 billion reported in FY23.
Chairman Dellsons Associates asserted that with concrete measures rolled out by the government in collaboration with the private sector and other stakeholders, remittance inflows could increase by an additional $5 billion during this fiscal year and potentially reach $10 billion in the next few years. These measures can significantly improve foreign exchange inflows and offset the current account deficit.
To encourage overseas Pakistanis to use formal banking channels and to launch easy-to-use innovative services, facilitating communities in the Gulf region along with sustainable policies is essential, Amin concluded.
