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The Story of growing RemittancesBy Asif Punjwani September 28th, 2012

If there is an economic news that officials donot mind repeating in every press release, that newsis the growing remittance Pakistan has been enjoyinglately, about $1.2 billion a month. I somehow get thisfeeling that Ministry of Finance is claiming credit for itand it proud of it.

It took me a while to understand that these officialsand their bosses actually do have alot to do with thegrowing remittances to Pakistan.International GrowthCentrehad a report out in June analyzing data onremittance. There were a lot of numbers and

statistical jargon. Ill get straight to the meat of it along with SBPs remittance report.Heres the SBPs Remittance report breakdown

Pakistan receives about $1.2 billion/month in remittance

Just over 15% comes from Europe

Around 20% comes from North America

A whopping 58% comes from the Middle East.

Now some interesting figures from the IGC report. Remember, these are mere estimates Pakistan ranked #7th in top Emigration Country (i.e. Citizens leaving the country)

Immigrant headcounts sending money to Pakistan grew from 4 million to about 8 millionsenders between 2004~2012

Between 2004~2009, North American migration did not increase. Most of the migrationwas to Middle East and Europe.

Europes migration actually has turned negative since 2009 but Middle East remainspositive.

Average US remittance transaction amount is almost double ($790) to that of MiddleEast ($392~$505)

Now to make sense out of this - Most of the remittances comes from Pakistani bread earnersproviding cheap labor to Middle Eastern countries and sending money back home to supporttheir families. These remittances arent primarilycoming from affluent Pakistanis who havesettled in the Western countries. The rise in remittance is primarilycoming from more breadearners fleeing Pakistan to Middle Eastern countries providing those economies with cheaplabor. They do not earn as much but the headcount makes up the chunk of their share.

http://www.theigc.org/sites/default/files/Amjad%20et%20al_Tenfold_Remittances_Final.pdfhttp://www.theigc.org/sites/default/files/Amjad%20et%20al_Tenfold_Remittances_Final.pdfhttp://www.theigc.org/sites/default/files/Amjad%20et%20al_Tenfold_Remittances_Final.pdfhttp://www.theigc.org/sites/default/files/Amjad%20et%20al_Tenfold_Remittances_Final.pdfhttp://www.theigc.org/sites/default/files/Amjad%20et%20al_Tenfold_Remittances_Final.pdfhttp://www.theigc.org/sites/default/files/Amjad%20et%20al_Tenfold_Remittances_Final.pdf

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So you see folks, Ministry of Finance is rightly taking credit for rising remittance. They havefigured a way out to increase remittance... by raising inflation via deficit spending. They havefigured out that if they make things in Pakistan so miserable these bread earners will start toleave Pakistan, but continue to send money back to their families. Ministry of Finance & SBPwill get their hands on the foreign reserves, commercial banks will get a cut from the exchangerate spread and everyone wins! Ofcourse, everyone doesnt include the fam ily of the bread

earner. Thats Middle Easts problem now.Ofcourse, I possibly couldn't end this article without that famousquote Why dont they leavethen? They did. They actually did leave and are now picking your tab of foreign trips andlavish imported cars. Let us all hope and pray that Mr Ex-PM doesnt get to leave when the timecomes.

Asif Punjwani trades Equities, Bonds and derivatives in the

International Capital Markets. He can be reached via Twitter

@AsifAmeer_AP

http://www.youtube.com/watch?v=ymlG6L8vszE&feature=relatedhttp://www.youtube.com/watch?v=ymlG6L8vszE&feature=relatedhttp://www.youtube.com/watch?v=ymlG6L8vszE&feature=relatedhttp://www.youtube.com/watch?v=ymlG6L8vszE&feature=related