Remittances under threat
No matter how expected a slump in remittances was, news items confirming such fears still make for some worrying reading. That is because knowing about and understanding a problems does not always mean that it can be solved easily. Now, just as the economy is contracting for the first time in many decades – anywhere between negative 0.5 and two per cent, depending on whose analysis you are reading – the time has also come for remittances to begin falling short of the usual number. Financial trauma in the US as well as the Gulf countries, where most expatriate Pakistanis live and work, is now having a very pronounced knock on effect on the Pakistani economy for very obvious reasons.
Yet the Gulf dilemma is two-fold. Pakistanis that have become citizens of western countries at least have the option of applying for unemployment allowances and even get paid a good part of their last incomes as they look for fresh work. Though they are unable to send any money home as long as they are out of work, but they do not provide any more problems for decision-makers here. There’s no such thing in the Middle East. Countries there do not offer permanent residency. So people that get laid off over there have a very limited amount of time to find other employment and renew their visas. Otherwise they must leave those countries and come back to Pakistan. And that only increases the overall level of stress in the job market back home. Accommodating a returning army of unemployed people will be very difficult to absorb in a market already hemorrhaging jobs at an unprecedented level.
Remittances are only one side of the revenue story, of course, and the news from tax and export earnings is no better. All this means that the government is going to have to invest a lot of time and effort in negotiating fresh loans as well as getting old loans written off, or at least put off for a while. The whole world is neck-deep in the fight against the coronavirus, so our creditors would be expected to understand that the government will need to be solvent to stay alive. There’s precious little they will get out of us if the coronavirus finishes us off before they can reclaim all the owed money, so it’s in their best interest as well as ours to give us more space at this point in time. The hit to the remittance stream ought to be a timely eye opener, since more bad news is expected with every quarter. It seems this particular graph will go down, for a while at least, before it starts to go up again.
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