Remittances should be redirected towards education and health development

The State Bank of Pakistan says the Pakistan economy could grow between 2.5 per cent and 3.5pc during this fiscal year ending in June 2025. Even a 3.5pc growth this year, followed by last year’s 2.38pc, will be too little to lift any significant number of the 40pc of Pakistan’s population out of poverty. Nor can it be helpful in the creation of jobs; an estimated 10m employable people may remain jobless.
The recent reading of the large-scale manufacturing (LSM) output is worrisome. In two months of this fiscal year (July-August 2024), LSM showed a negative growth of about 0.2pc — and in August alone, the decline was a much sharper 2.7pc.
In the last fiscal year, LSM growth was just 0.92pc, and the 2.38pc GDP growth was driven mainly by growth in agriculture and, to some extent, in the services sector. Going forward, LSM output may start recovering during this fiscal year following the easing of monetary policy, largely due to last year’s low base.
However, the ongoing energy reforms — as dictated by the International Monetary Fund — and the resultant price hikes of energy products, including gas and electricity, may continue to throw a wrench in the works. Growing militancy and political uncertainty in the country may also make the much-needed industrial recovery too difficult.
One must keep this context in mind before looking at growing trends of goods’ exports and remittances; whereas growth in exports and remittances may help contain the current account deficit (CAD), it can’t directly help in job creation or poverty alleviation. Goods’ exports are growing on last year’s low base and amidst the easing of import restrictions that had initially constrained the manufacturing of exportable goods with imported inputs.
In the last fiscal year, remittance income totalled $30.3 billion. In the first three months of this fiscal year (July-September), remittances have grown about 39pc year-on-year to $8.786bn. This has raised hopes that total yearly inflows would touch or even cross the $36bn mark, more so because Eidul Fitr and Eidul Azha-related additional remittances are due within this fiscal year. This would surely help in containing the CAD.
However, the problem is higher inflows of remittances in Pakistan have never been utilised for social development effectively due to a lack of supportive policies by the government. During January-September this year, 525,378 Pakistanis left the country for overseas jobs, according to the Bureau of Emigration and Overseas Employment. In 2023, the number of people who went abroad for work totalled 862,625.
If Pakistan’s remittances continue growing amidst such large-scale exports of the human workforce, it deserves a deeper analysis to see how many professionals leave the country yearly and if this trend is sustainable.
A more important question is why can’t we use remittances in the higher education sector to continually fill in the gap being created in the economy as doctors and engineers, bankers and accountants, and other professionals leave the country? According to the Bureau’s report, out of the 525,378 people who left, 15,234 were highly qualified professionals, 25,552 were highly skilled workers, and 183,183 were skilled workers.
Both Bangladesh and India have been using remittances income for social development. Pakistan can learn from their experiences. For example, overseas Bangladeshis can invest in Wage earners’ development bonds. The funds collected are used for social development initiatives, including healthcare and infrastructure projects.
Moreover, a Bangladeshi Foundation helps fund microcredit programmes aimed at enhancing rural development, education, and health services. In India, diaspora income is used in projects related to education, healthcare, sanitation, and women’s empowerment. The famous Mahila Samridhi Yojana scheme of India channels remittances into women’s education and entrepreneurship programmes.
Overseas Pakistanis’ remittances collected via Roshan Digital Accounts can be used for similar initiatives instead of allowing them to be parked into government treasury bills and bonds or be used in often speculative and sometimes fraudulent housing schemes.
Among other things, growth in remittances is directly linked with political stability in the recipient country and the country’s relationship with the host countries of its diaspora. The bulk of remittances to Pakistan come from four major host countries: Saudi Arabia, the United Arab Emirates, the UK, and the US, in the same order.
There is a need to diversify the sources of remittances, more so in the fast-changing geopolitics of the Gulf Cooperation Council region and Pakistan’s slow yet visible political distancing with the US and the UK.
Even if our relations with Saudi Arabia and UAE remain strong, will these two countries remain conducive for Pakistani workers amidst growing competition with the diaspora of other nations? There is also a possibility that the UK and US-based Pakistanis may send fewer remittances to Pakistan if political instability in the country grows.
Pakistan needs to aim for deeper penetration into the future remittances market now. The skilled and highly skilled workforce may have better job prospects in countries like Japan, South Africa, South Korea and Malaysia.
Published in Dawn, The Business and Finance Weekly, October 21st, 2024