Ever changing GCC remittance market and its impact on Pakistan.

Byline: Ahsan Nisar

The Gulf Cooperation Council (GCC) countries have positioned themselves as the highest remitters in the world, collectively beating the United States, the traditional top remitter. The GCC and the wider Middle East, is a vital and rising economic hub bringing people together from across Europe, Africa and Asia. International migrants working and living across the region represent a large part of the population. In the UAE, international migrants account for 88 percent of the population, followed by Kuwait at 72 percent, Bahrain at 51 percent, Oman at 41 percent. The large expatriate workforce in the region means that there is a strong need for them to send money to their families and loved ones back home. After the US, Saudi Arabia, UAE and Kuwait were in the top 10 remittance sending countries globally in 2018, according to the World Bank.

The four-month number for workers remittances inflows are in, and the situation does not look very good so far. By the end of 1QFY20, remittances flows had slipped by 1.4 percent year-on-year; October has added to the blues when the flows dropped by 2.9 percent, taking the 4-month drop to nearly 2 percent. The reasons behind this fall appear to macroeconomics of the oil-producing region and perhaps of Pakistan's that have offset the impact of efforts being taken to reduce the cost of remittances while increasing the number of tie-ups with banks and agencies in the origin countries.

Since FY19, the government including those led by the Pakistan Remittance Initiative has been taking a number of measures to incentivize overseas Pakistanis to send remittances through formal channels. The list includes bank-led marketing campaigns in labor camps, exemption of Withholding Tax (WHT) on cash withdrawals from PKR accounts that are solely fed by foreign remittances, and the launch of innovative technological platforms.

These efforts, however, can only do so much, when regional economies aren't doing too well. For instance, the fall in remittances from Saudi Arabia can be reasoned to the slowdown in the kingdom's economy. The...