Pakistani Diaspora Bucks Global Trend With 2.8% Higher Remittances in 2016

Pakistani diaspora bucked the 2016 global decline in remittances with a modest 2.8% increase over 2015, according to a recently released World Bank report. An estimated $19.8 billion remitted to Pakistan amounted to 6.9% of the country's GDP. This is a welcome relief coming on the heels of the State Bank of Pakistan report indicating the country's current account deficit widened to $6.13 billion or 2.6% of GDP in the first 9 months of fiscal 2017.

2016 Remittances to South Asia. Source: World Bank

Global Decline:

Meanwhile, global remittance flows to developing countries registered a decline for two successive years, said the report.  Remittances declined by an estimated 2.4 percent, to $429 billion, in 2016, after a decline of 1 percent in 2015. India, the largest remittance-receiving country worldwide, led the fall with a decrease of 8.9 percent in remittance inflows.

South Asia Region:

Remittances to India declined by 8.9 percent in 2016, to $62.7 billion, ranking the country as the top recipient of such inflows.  In Bangladesh, remittances declined by an estimated 11.1 percent in 2016. In Pakistan, the 12 percent growth witnessed in 2015 moderated to an estimated 2.8 percent in 2016. Nepal experienced unusually high growth in remittances, at 14.3 percent in 2015, due to emigrants sending financial assistance after the earthquake. In 2016, remittance flows to Nepal declined by an estimated 6.7 percent from the previous year’s high level. In Sri Lanka, remittance growth was estimated at 3.9 percent in 2016.

Next Year Forecast:

The World Bank says the remittance growth in the region is projected to remain muted, because of low growth and fiscal consolidation in GCC countries with low energy prices. An increase of only 2.0 percent is expected in 2017. Bangladesh’s remittance growth in 2017 is forecast at 2.4 percent, India’s at 1.9 percent, Pakistan’s at 1.4 percent, and Sri Lanka’s at 1.3 percent.

Summary:

World Bank report says Pakistani diaspora bucked the 2016 global decline in remittances with a modest 2.8% increase over 2015. An estimated $19.8 billion remitted to Pakistan amounted to 6.9% of the country's GDP. This is a welcome relief coming on the heels of the State Bank of Pakistan report indicating the country's current account deficit widened to $6.13 billion or 2.6% of GDP in the first 9 months of fiscal 2017. Future growth in remittances is likely to remain muted. Slowing growth in such inflows will further increase pressure on Pakistan to work on enhancing exports and attracting more foreign direct investment.

Related Links:

Haq's Musings

CPEC and FDI

Pakistan Remittances Rise Amid Falling Oil Prices

Pakistani Diaspora Among World's Largest

China-Pakistan Economic Corridor (CPEC) to Add 2 Million Jobs

ADB Raises Pakistan GDP Growth Forecast

Gwadar as Hong Kong West

China-Pakistan Industrial Corridor

Comments

Riaz Haq said…
China bails out Pakistan with over $1bn in loans

Rising imports and falling exports and remittances pose threat of new forex crisis

https://www.ft.com/content/3ae64c9a-ffd8-11e6-96f8-3700c5664d30


China has provided Pakistan with over $1bn in bailout loans since June last year, as the south Asian country looks to stave off a foreign currency crisis that could yet lead to another multinational rescue package.


State-backed Chinese banks have come to Pakistan’s rescue on two separate occasions, officials have told the Financial Times, with $900m coming in 2016, followed by another $300m in the first three months of this year.

The loans demonstrate the perilous fragility of Pakistan’s stocks of foreign currency, which have been depleted in the past few months as imports have risen while both exports and inbound remittances from Pakistanis abroad have fallen.

China’s financial help also underlines the increasingly close, if complex, relationship between the two Asian neighbours.

In 2013, Pakistan secured a $6.6bn loan from the International Monetary Fund after being faced with a similar balance of payments crisis. In the same year, it quietly took advantage of a currency swap line with the People’s Bank of China, the central bank, to shore up its reserves.

Islamabad made the final repayment on the IMF loan last year, prompting optimism from policymakers in Pakistan and abroad that the country was finally on the path to economic stability. Christine Lagarde, the head of the IMF, called it a “moment of opportunity” for the country.

In recent months however, the country’s trade deficit has widened, depleting its foreign reserves once more.

Figures from the State Bank of Pakistan show the country had $17.1bn of net reserves at the end of February, down from $18.9bn at the end of October and a peak of $25bn several years ago. A burgeoning trade deficit with China — which has doubled in recent years, according to data from the Pakistan Business Council — is a big part of the problem.



This has forced the country to seek emergency loans from outside sources to keep being able to repay older loans made in foreign currencies.

Of the $1.2bn from the Chinese institutions, $600m came from the government-run China Development Bank and another $600m from the state-owned Industrial and Commercial Bank of China, the only mainland bank to have a branch in Pakistan. Policy banks such as CDB often act on behalf of the central bank.

One Pakistani official said: “China keeps a very close eye on our economic trends and they're happy to come to our help wherever needed.”

The recent deterioration is expected to continue, however, with China’s investment plans prompting a surge of imports from that country. As a result, experts are now warning Pakistan is likely to have to return to international institutions such as the IMF for further support.

“Technically speaking we should have gone back to the IMF in January, but ministers are likely to try and wait until after the election [which is planned for 2018],” said Vaqar Ahmed, deputy executive director of the Islamabad-based Sustainable Development Policy Institute.

One member of the ruling PML-N party confirmed to the Financial Times that ministers were loath to return to the IMF until after the election in an effort to limit the political fallout.

“The IMF is a politically volatile issue in our country. If we go to the IMF to deal with our needs, that will send a very negative political signal and the opposition [parties] will use that against the government,” the person said.
Riaz Haq said…
#Pakistan to set up #infrastructure bank with $1 billion capital to finance private sector development. #IMF #IFC

https://tribune.com.pk/story/1394404/pakistan-set-1b-infrastructure-bank/

Finance Minister Ishaq Dar has announced that the government will set up Pakistan Infrastructure Bank with a paid-up capital of $1 billion, which will give financing to private investors for development projects.

Pakistan government and the International Monetary Fund (IMF) would have 20% shares each in the bank and the rest would be held by global organisations such as the International Finance Corporation, he said.

AJK plans tourism corridor along CPEC
He was speaking at a briefing held for the Pakistani media towards the end of his visit to Washington DC during which he attended spring meetings of the IMF and the World Bank.

Dar also revealed that the government would soon be launching Pakistan Development Fund (PDF) and its shares worth Rs100 billion would be offered to Pakistani diaspora in order to channelise their remittances effectively.

Later, these shares will be listed on the Pakistan Stock Exchange. “After the success of Sukuk (Islamic bonds), the PDF will be another attractive investment for overseas Pakistanis,” he remarked.

Giving a detailed round-up on the plenary sessions with the IMF and World Bank, the minister said there was positive sentiment about the tremendous economic rebound experienced by Pakistan over the last four years.

“Pakistan was on the verge of bankruptcy in 2014 and today it is likely to achieve approximately 5% growth during the current financial year,” he said. “Both IMF and World Bank are on the same page with the Pakistani government in these projections.”

Promotion of it: Work on innovation centres begins

Global credit rating agencies have upgraded the rating of Pakistan from negative to stable and from stable to positive in the last four years to an extent that the country is likely to be included in G-20 countries by 2030.
Riaz Haq said…
Excerpt from State Bank of Pakistan Report 1H/2017

http://www.sbp.org.pk/reports/quarterly/fy17/Second/qtr-index-eng.htm

http://www.sbp.org.pk/reports/quarterly/fy17/Second/Chap-1.pdf


Preliminary data on crops indicates that agriculture growth will rebound in FY17.
The production of major kharif crops, including cotton, sugarcane, and maize is
estimated to increase significantly this year. The output of major rabi crop, i.e.,
wheat is also expected to remain close to the last year’s bumper crop of 25.4
million tons on the back of timely and widespread rains.
7
Besides improved
water situation (from January 2017 onwards), an increase in fertilizer off take (33
percent higher), and higher credit disbursement (up 32 percent) during Rabi
season also point to a better performance of the crops subsector.
Encouragingly, LSM growth has picked up momentum in Q2-FY17 (rising by 5.8
percent YoY). This partly compensated the sluggish Q1-FY17 growth of 2.1
percent. As a result, the cumulative growth during H1-FY17 increased to 3.9
percent, same as the last year. The major contribution to LSM growth during H1-
FY17 came from food, steel, cement and pharmaceutical industries.

These industries largely benefited from accommodative monetary and fiscal
policies; improved energy supplies; better availability of raw materials (e.g.,
sugarcane); rising domestic demand (particularly for cement and steel, owing to
ongoing CPEC-related power and infrastructure projects); and clarity on drug
pricing mechanism. In addition, the recently announced export package would
also provide much needed support to export industries, especially textile – the
historical mainstay of LSM growth.
On the other hand, the available information on services sector indicators points
to a mixed performance. Healthy trends in transport (given the surge in sales of
trucks, buses, and POL products); increased (external) trade volumes along with
better output of agriculture and industry (having positive spillover for wholesale
and retail trade); significant increase in bank credit; and a rise in 3G/4G
subscription base (27 percent) during H1-FY17, all indicate towards an uptick in
the services sector’s performance. At the same time, losses of Public Sector
Enterprises (PSEs), and a decrease in banks’ profitability, act as potential drags.
On balance, however, the services sector is expected to keep up last year’s growth
momentum (see Chapter 2 for details).
Meanwhile, ongoing investments in energy and infrastructure sectors (and strong
transport sector activity) resulted in a sharp increase in import demand, especially
for capital goods and raw materials. Led by higher imports of machinery (power
and construction) and petroleum (including LNG), the total import bill grew by
6.0 percent during H1-FY17, compared to 8.9 percent decline in the
corresponding period last year.8

This surge in imports was partly a result of rising commodity prices, especially
crude and palm oil. This, combined with the non-receipt of CSF in H1-FY17 and
decline in exports and remittances, resulted in the almost doubling of the current
account deficit to US$ 3.5 billion during first half of the year. (Here, it is worth
mentioning that the receipt of CSF in Q3-FY17, and recently announced package
for exports may help balance of payments going forward.)
Encouragingly, available financial inflows were more than sufficient to finance
the higher current account deficit. Major foreign exchange inflows included US$
1 billion from a Sukuk and net loans of US$ 1.4 billion (including US$ 900
million of commercial borrowings). In addition, net FDI increased by 10.5
percent to US$ 1.1 billion during H1-FY17, from US$ 978 million last year.
Riaz Haq said…
#UN survey sees higher GDP growth for #Pakistan from 5.2% in FY17 to 5.4% in FY18. #UNESCAP https://www.dawn.com/news/1330886

The economic growth outlook for Pakistan is projected to trend up to 5.2 to 5.4 per cent in both 2017 and 2018, forecasts the latest Economic and Social Survey of Asia and the Pacific 2017.
Private consumption and public investment would drive the economy, supported by higher consumer credits, improved security conditions and ongoing infrastructure projects under the China-Pakistan Economic Corridor (CPEC), says the survey which focused on ‘Governance and Fiscal Management’.

Increased capital inflows from China to finance projects under CPEC have helped generate foreign exchange receipts, although imports of transport and construction-related items also increased, the survey by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) notes.

The survey says that private investment was stronger in Pakistan as CPEC helped attract more foreign investment.

On the supply side, the large-scale manufacturing sector should benefit from greater energy security and a notable cut in gas prices for industrial use. Similarly, the agricultural sector is likely to improve, with expanded production of cotton, sugarcane and maize, the survey notes.

Meanwhile, a rebound in global oil prices and an upward adjustment in domestic petrol prices would push up inflation during the fiscal year 2017-18 from 5pc to 5.5pc, which is still within the official target of 6pc.
Riaz Haq said…
The hidden truth behind India’s low refrigerator ownership
http://blogs.economictimes.indiatimes.com/et-commentary/the-hidden-truth-behind-indias-low-refrigerator-ownership/

Nearly 90% families in China today have a refrigerator. What about India?
The 2016 ICE 360° survey showed that a little less than 30% of Indian families have a refrigerator. At first glance, we may conclude that a fridge is still an aspirational product that doesn’t fit into the majority of Indian families’ budgets. That reasoning however, does not hold up.
The same survey showed that even in the top 20% of the richest Indian families, only six out of 10 families have a fridge. This suggests that constraints other than affordability are at work here that influence households’ decision to buy a refrigerator.
While a threshold level of income is a necessary condition for the purchase of a refrigerator, it is not the sufficient condition.
The 2011 census shows that nearly twice the number of households in rural India own a two-wheeler, which costs much more than a fridge.
This kind of hierarchical pattern in the ownership of a two-wheeler and a fridge in India is unlike in any other major economy.
So Women can Chill
In a March 2017 paper in the Journal of Quantitative Economics (From Income to Household Welfare: Lessons from Refrigerator Ownership in India, by Sowmya Dhanaraj, Vidya Mahambare and Poonam Munjal), this apparent puzzle is explored.
Following a robust statistical methodology and controlling for the impact of a number of other determinants such as regional influences, two factors stood out. One, a refrigerator is unique among all energy-using consumer durables.
Unlike the television or air-conditioner, the decision to purchase a fridge depends not only on the access but also reliability and duration of residential power.
Unlike a TV, a fridge is of little use unless uninterrupted power supply is guaranteed. Nearly 43% of rural households and 13% of urban households in India either do not have access to electricity, or receive electricity for less than eight hours. This makes it a major constraint to buy a durable such as a refrigerator. In fact, only around half of India’s population receives residential power for more than 16 hours a day.
Two, unlike a TV, which is a leisure good, a refrigerator disproportionately benefits women in the family.
As a result, a decision to purchase a consumer durable is also driven by their bargaining and decision-making power within a family. And what would tilt the intra-household bargaining power in favour of women? It is largely the function of the education level of women.
Riaz Haq said…
Economic Survey of Pakistan 2016-17


http://www.finance.gov.pk/survey/chapters_17/overview_2016-17.pdf


Per Capita Income in dollar terms has witnessed
a growth of 6.4 percent in FY 2017 as
compared to 1.1 percent last year. The per
capita income in dollar terms has increased
from $ 1,531 in FY 2016 to $ 1,629 in FY
2017. Main contributing factors for the rise in
per capita income are higher real GDP, growth,
low population growth and stability of Pak
Rupee.

------------------

Real GDP growth was above
four percent in 2013-14 and has smoothly
increased during the last four years to reach
5.28 percent in 2016-17, which is the highest in
10 years.

----

The agriculture sector met
its growth target of 3.5 percent, helped by
government supportive policies and by
increased agriculture credit disbursements.
During 2015-16, the agriculture credit
disbursement was close to Rs 600 billion while
during 2016-17, the target was raised to Rs 700
billion. During July-March 2016-17, the
disbursement was observed to be 23 percent
higher as compared to the previous year. These
developments, along with the Prime Minister’s
Agriculture Kissan Package together with other
relief measures have started yielding positive
results.
The large-scale manufacturing output is
primarily based on Quantum Index
Manufacturing (QIM) data, which show an
increase by 5.06 percent from July 2016 to
March 2017. Major contributors to this growth
are sugar (29.33 percent), cement (7.19
percent), tractors (72.9 percent), trucks (39.31
percent) and buses (19.71 percent). High
growth of sugar is based on production of 73.9Million Tons of Sugarcane as compared to 65.5
million tons last year, which represents an
increase by 12.4 percent.
Large Scale Manufacturing growth has picked
up momentum and posted a strong 10.5 percent
growth in the month of March 2017 compared
to 7.6 percent in March 2016. The YoY growth
augurs well for further improvement in growth
during the period under review.
On average, the LSM growth stood at 5.06
percent during July-March FY 2017 compared
to 4.6 percent in the same period last year. The
sectors recording positive growth during JulMar
FY 2017 are textile 0.78 percent, food and
beverages 9.65 percent, pharmaceuticals 8.74
percent, non-metallic minerals 7.11 percent,
cement 7.19 percent, automobiles 11.31
percent, iron & steel 16.58 percent, fertilizer
1.32 percent, electronics 15.24 percent, paper &
board 5.08 percent, engineering products 2.37
percent, and rubber products 0.04 percent.
Pakistan is bestowed with all kinds of resources
which also include minerals. Pakistan possesses
many industrial rocks, metallic and nonmetallic,
which have not yet been evaluated. In
the wake of the 18th Amendment, provinces
enjoy great freedom to explore and exploit the
natural resources located in their authority, with
the result that they are currently undertaking a
number of projects using their own resources,
or in collaboration with the federal government
or with donors to tap and develop these
resources.
The services sector recorded a growth of 5.98
percent and surpassed its target which was set
at 5.70 percent. Wholesale and retail trade
sector grew at a rate of 6.82 percent. The
growth in this sector is bolstered by the output
in the agriculture and manufacturing sectors.
The share of Agriculture, Manufacturing and
Imports in Wholesale and Retail Trade growth
is 18 percent, 54 percent and 15 percent
respectively. The Transport, Storage and
Communication sector grew at a rate of 3.94
percent. Finance and insurance activities show
an overall increase of 10.77 percent, mainly
because of rapid expansion of deposit formation
(15 percent) and demand for loans (11 percent).
Riaz Haq said…
Global worker #remittances to #India down 8.9%. #Kerala worst hit. 36% of state's economy depends on remittances.

http://m.todayonline.com/chinaindia/india/gulf-woes-resound-across-south-asia-worker-remittances-drop

For 16 years, Mr Jobby Peter has supported his family back home in India by working in the bustling, oil-driven economies of the Gulf. In his most recent job, the 41-year-old welder was earning nearly US$500 (S$695) a month fabricating oil tanks in Dubai’s Jebel Ali Free Zone.
But four months ago, he abruptly found himself unemployed when he and 40 co-workers, all from south Asia, were told their services were no longer required. Low oil prices had hit orders, and the fabrication unit was being shut down.
“They told us, ‘All of you have to go back because we have no demand any more,’” said Mr Peter, who was given three months’ salary and a ticket back to India.
Today, he is working occasionally in a Cochin shipyard while trying to get back to the Gulf. One recent Saturday, he was among nearly 1,000 people queueing for interviews with construction companies recruiting skilled workers for a clutch of welding jobs in the region. “I am trying,” he said. “I am hopeful.”
But Mr Peter’s hopes may be misplaced. For nearly two decades, millions of workers from India and other south Asian countries, including Nepal, Bangladesh and Pakistan, have looked to the oil-driven economies of the Gulf Co-operation Council for jobs and salaries that are unavailable at home. But low global oil prices and cash-strapped Gulf countries’ efforts to find employment opportunities for their own citizens, are reversing that tide.
Construction work has been hit by a severe liquidity squeeze, leading to lay-offs of foreign workers, some of whom have been left stranded in the desert by their former employers. Meanwhile, service industry jobs previously undertaken by foreign workers, such as positions as shop assistants and mobile phone repair technicians, have been reserved for locals as Gulf economies pare their social welfare schemes.
For foreign workers who still have jobs, wages are also under pressure as employers attempt to freeze salaries and recruitment agencies look to poorer countries to hire workers.
“Wages in the Gulf will come down,” said Mr S Irudaya Rajan, a migration expert at Trivandurum’s Centre for Development Studies. “They will replace people with those that are willing to work for less, and that is where you will find remittances coming down.”
Migrant workers’ remittances to south Asia fell 6.4 per cent last year after years of steady increases. Remittances to India slumped 8.9 per cent in 2016 – the second consecutive year of decline – to US$62.7 billion, down from US$72 billion two years earlier.
Although remittances account for just 2.8 per cent of India’s gross domestic product (GDP), the decline is a blow to the southern state of Kerala, where they make up 36 per cent of the local economy.
“There is no household that doesn’t have some direct or indirect relationship to migrant workers in the Gulf,” said Mr Shashi Tharoor, a member of the national parliament from Kerala.
“Without this kind of money coming in, a lot of people’s lives are going to be seriously affected. We are going to be facing a very serious crisis if this trend continues.”

Popular posts from this blog

China Sees Opportunity Where Others See Risk

Economic Comparison Between Bangladesh & Pakistan

Smartphones For Digital & Financial Inclusion in Pakistan