Pakistan is in serious economic trouble. Despite several policy initiatives, the value of its exports is not increasing. The trade deficit has thus widened to unprecedented proportions. The foreign exchange reserves are fast depleting. Under the circumstances, remittances from abroad are playing a crucial role in support of the national economy. Today, the amount of money earned from exports is almost the same as the money sent by Pakistanis working abroad. But how far can we rely on the remittances?
Remittance is money sent from abroad. There are millions of Pakistanis settled in other countries. Together, they send nearly $19 billion to their families in Pakiatan. It is with this money that many people run their households. The role of the remittances has been growing for several decades. However, the trend might not hold for long. Given the domestic conditions and policies of the countries where most of the Pakistanis are settled, it is fair to predict a bleak future for remittances. The contribution of remittances to Pakistan’s foreign exchange inflows is likely to plummet in times to come.
Most of the Pakistanis abroad are settled in United States, Britain, the United Arab Emirates, the Kingdom of Saudi Arabia and few other Gulf countries.
There are around three million Pakistanis in Britain. They not only send money to Pakistan but also keep inviting their relatives to pursue higher education in the country. But the economic future of Britain after leaving the European Union is uncertain. Whether Britain would continue to allow foreigners to work in the country is debateable. It is argued that Brexit has been a reaction to immigration. Most of the working class people in Britain see foreigners replacing them in jobs. The fate of overseas Pakistanis in Britain is, therefore, hanging in the balance. If Brexit materialises and Britain becomes unaccommodating for immigrants, remittances would likely go down. Resultantly, some Pakistanis would leave Britain and return to the home country. Many Pakistanis in Britain are highly skilled. Their prospects in Pakistan however are not good as the national economy appears to be too small to absorb them all.
The Pakistani labour is no longer a competitive export in the international market
Saudi Arabia is the largest source of remittances to Pakistan. Many Pakistanis view the Kingdom as their second home. The Kingdom now has a Saudization Policy (2011). It is meant to cut reliance on foreign workers as more and more Saudis are participating in the job market. Under Crown Prince Muhamamd bin Salman, Saudi Arabia is sending hundreds of people abroad for higher education.
Pakistani labour is becoming less competitive in the international market. People from India, Sri Lanka, Bangladesh and the Philippines are replacing them.
Prospects for Pakistanis in other countries are not encouraging either. Qatar promised to invite 100,000 Pakistanis to work in the kingdom. However, the promise is yet to be fulfilled.
In the past, Kuwait has imposed a ban on Pakistanis working in the country for longer than a decade. It is only recently that the ban has been lifted.
The nature of international job market is changing fast. Machines are replacing humans. In advanced capitalist economies, factory workers are becoming a thing of the past. Robots are being introduced in almost all industries. The growth of global robot industry is an indicator of this trend. In the past, a person could work in an industry without a high level of skill. Handling and operating robots require skills that most Pakistanis lack. The literacy rate, 60 per cent in 2016, is just 58 per cent today. To make matters worse, our educational institutions continue to churn out graduates who are irrelevant to international businesses.
Protectionism and nationalism are on the rise. The US and China are engaged in a trade war. According to the IMF, this will cause a shrinking of global economic growth. This means growth rates of national economies, too, will fall. When growth rates go down, so do employment opportunities. To prevent unemployment among natives, host countries will refuse to allow immigrants.
Two kinds of drivers fuel an economy: external and internal. External drivers of the economy include remittances, loans, and money earned from exports. The internal drivers include mobilisation of human and natural resources.
External drivers of the economy always are always subject to external pressures. They are vulnerable to global changes. A global economic crisis can choke the inflows of loans and remittances. For growth to be sustainable, Pakistan will need to rely more on internal drivers. This is perhaps the best way to salvage the economy. The policymakers need to focus more and more on development of human capital and on tapping the untapped human resources.
Despite having abundant oil and gas resources, we continue to import the fuels from other countries. We thus return the remittances to the countries.
Once internal drivers of the economy are given due attention, Pakistan will be able to avoid the debt trap.
The writer is a freelancer