ISLAMABAD: Compared to the overall growth of 8 per cent in remittances of South Asia, remittances of Pakistan grew by 26pc during the current year until now, according to estimates from the World Bank’s Migration and Development Brief released on Friday.
“Pakistan had another year of record remittances with growth at 26pc and levels reaching $33 billion in 2021,” says the report.
In addition to the common drivers, the government’s ‘Pakistan Remittance Initiative’ to support transmission through formal channels attracted large inflows, it says, adding that Afghanistan’s fragile situation emerged as an unexpected cause of remittances intended for Afghan refugees in Pakistan as well as for families in Afghanistan.
According to the report, overall remittances to South Asia likely grew around 8pc to $159 billion in 2021.
Higher oil prices aided economic recovery and drove the spike in remittances from the Gulf Cooperation Council (GCC) countries which employ over half of South Asia’s migrants. Economic recovery and stimulus programs in the United States also contributed to the growth.
In India, remittances advanced by an estimated 4.6pc in 2021 to reach $87 billion, according to the report.
Remittances is the dominant source of foreign exchange for the region, with receipts more than twice as large as FDI in 2021.
On remittance costs, the report states that South Asia had the lowest average costs of any world region at 4.6pc but sending money to the region through official channels is expensive compared with informal channels which remain popular.
Cost-reducing policies would create a win-win situation welcomed by migrants and South Asian governments alike, the report suggested.
The report says, remittances to low and middle-income countries are projected to have grown a strong 7.3pc to reach $589 billion by the end of 2021.
This return to growth is more robust than earlier estimates and follows the resilience of flows in 2020 when remittances declined by only 1.7pc despite a severe global recession due to COVID-19, according to the brief.
For a second consecutive year, remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA).
This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.
“Remittance flows from migrants have greatly complemented government cash transfer programs to support families suffering economic hardships during the COVID-19 crisis. Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic,” World Bank Global Director for Social Protection and Jobs Michal Rutkowski said.
Factors contributing to the strong growth in remittance are migrants’ determination to support their families in times of need, aided by economic recovery in Europe and the United States which in turn was supported by the fiscal stimulus and employment support programs.
In the Gulf Cooperation Council (GCC) countries and Russia, the recovery of outward remittances was also facilitated by stronger oil prices and the resulting pickup in economic activity.
Although remittances registered strong growth in most regions as flows increased by 21.6pc in Latin America and the Caribbean, 9.7pc in Middle East and North Africa, 8pc in South Asia, 6.2pc in Sub-Saharan Africa, and 5.3pc in Europe and Central Asia, in East Asia and the Pacific; however, remittances fell by 4pc – though excluding China, remittances registered a gain of 1.4pc in the region.
Moreover, remittances are projected to continue to grow by 2.6pc in 2022 in line with global macroeconomic forecasts. A resurgence of COVID-19 cases and reimposition of mobility restrictions poses the biggest downside risk to the outlook for global growth, employment and remittance flows to developing countries.
The report concludes that the rollback of fiscal stimulus and employment-support programs, as economies recover, may also dampen remittance flows.
