Role of Remittances in Pakistan

                                       Role of  Remittances in Pakistan

Remittances play a major role in stabilizing of Pakistan external sector as they make up almost half the import bill and cover the deficit in the trade of goods account. Pakistan receives most of its remittances from the Gulf countries but the Saudi Arabia and the UAE is the leading source of remittances for Pakistan. 

Reports.

According to the state Bank of Pakistan (SBP) Survey report 2022-23. During the year 2022, 829549 people were employed abroad, while in May 2021, this number was 286648. 

Advantage of Remittances.

The Government of Pakistan realizes the importance of timely receipt of these remittances by the families of migrants and migrant workers and it has launched different initiatives to facilitate the flow of remittances through the legal channels. Remittance networks have evolved from traditional modes of transfer to digital mode of money transfer. Due to the rise of digital remittances there is less reason for the people to favors alternative remittances because, these remittances are through legal channels.

Modes of Remittances.

There are many ways to send the remittances but the banking channels are a vital source of balance of payments support for the country. for example cash over counter, online transfer, others banks beneficiaries, inter bank fund transfer, Mobile wallets. Also further options to send the remittances through different organizations like Western Union, Money Gram, Transfast, Azimo, cash express and Telenor easy passa etc.

Relationship between Remittance and poverty.

The main purpose of the study was to investigate the relationship between remittances, education and poverty in Pakistan. There is general view that if remittances increase the poverty reduces. The study is based on time series data taking from the period of 1980 to 2015. The data was obtained from world development indicator (WDI) and from the state bank of Pakistan (SBP).Nine variables were used in the study such as poverty was dependent variable while remittances, inflation consumer price index (CPI), Unemployment, trade percent  (GDP), life expectancy, literacy rate, government expenditures on education and economics growth (GDP) were independent variables. Auto Regressive Distributed Lag Model (ARDL) was used for empirical analysis. The results of ARDL model show that remittance, government education expenditure, trade percent (GDP), literacy rate and economic growth (GDP), literacy rate and economic growth (GDP) has a negative effect and significant on poverty. Inflation (CPI) and unemployment has positively effect on poverty and significant. The results also show that the long-run relationship between education, remittances and poverty. Life expectancy has a negative impact and insignificant impact on poverty.

 

conclusion.

 The finding shows that poverty and remittances are related with each other. Poverty in Pakistan has significant relation with remittances. If the remittances will increase the poverty in Pakistan will also decrease. Due to increase in remittances the living standard of the people rises that’s why poverty decreases.

Recommendation.

 This study suggested that policy makers should make policies to reduce the transaction cost and give incentives to foreigners to welcome remittances in Pakistan.