http://www.dailytimes.com.pk/default.asp?p...7-6-2006_pg5_14


Saturday, June 17, 2006

Record $506.57m workers’ remittances in May

Staff Report

KARACHI: The country received record workers' remittances in May this year as overseas Pakistanis remitted an amount of $506.57 million against $358.30 million received in the same month of last fiscal year.

The growth in remittances in May depicted an impressive increase of $148.27 million, or 41.38 per cent over the corresponding period of previous year, the data provided by the State Bank of Pakistan (SBP) shows.

The remittances in July-May of 2005-06 also registered a growth as in 11 months of the current fiscal year Pakistan received $4,136.25 million as workers' remittances as against $3,809.81 million received in the corresponding period of the last fiscal year, registering an increase of $326.44 million, or 8.57 per cent.

The amount of $4,136.25 million includes $11.10 million received through encashment and profit earned on Foreign Exchange Bearer Certificates and Foreign Currency Bearer Certificates.

Despite the growth in remittances, which is the second largest source of foreign exchange inflows after exports, the huge increase in the current account deficit, caused by a widening trade gap is a source of worry for the economic managers of the country.

According to analysts, the total remittances are likely to touch $5 billion this fiscal year against an estimated trade deficit of more than $11 billion for the whole fiscal, however they believe that remittances would cover only a nominal part of the trade deficit.

They said that trade deficit went on growing so rapidly since the beginning of this fiscal year that remittances from overseas Pakistanis that used to bridge the trade deficit gap to a large extent is now unable to do it because of huge deficit on the back of higher oil and machinery bills.

The first 10 months' data indicates that Pakistani workers remitted $313.14 million, $348.41 million, $341.10 million, $372.50 million, $308.81 million, $371.24 million, $391.32 million, $358.13 million, $423.56 million and $401.47 million in July, August, September, October, November & December, 2005 and January, February, March & April, 2006, respectively. The monthly average remittances in the period under review amounts to $376.02 million as compared with $346.35 million during the same period of last fiscal year.

The inflow of remittances during the 11 months of the current fiscal year from the USA, Saudi Arabia, the UAE, the GCC countries (including Bahrain, Kuwait, Qatar and Oman), the UK and EU countries amounted to $1,119.34 million, $670.93 million, $635.54 million, $537.39 million, $400.00 million and $109.92 million, respectively, as compared with $1,184.93 million, $567.54 million, $652.11 million, $471.85 million, $338.21 million and $92.26 million during the corresponding period of the last fiscal year.

The accumulative remittances inflow from Canada, Australia, Norway, Switzerland, Japan and other countries during July-May 2005-06 amounted to $652.03 million as compared with $487.76 million in the corresponding period of last fiscal year.

Another healthier sign, the data says, is the increase in the inflow of remittances into Pakistan from almost all countries of the world increased last month as compared with May 2005.

The country-wise break-up shows that Pakistan received workers' remittances during May 2006 from the USA ($124.56 million), Saudi Arabia ($86.29 million), the UAE ($79.70 million), the GCC countries, including Bahrain, Kuwait, Qatar and Oman ($60.09 million), the UK ($53.60 million) and EU countries ($12.86 million) as compared with the corresponding receipts from the respective countries during the same month of the last fiscal year, ie, $108.71 million, $61.32 million, $71.24 million, $45.90 million, $28.22 million and $9.01 million.

The total remittances received from Canada, Australia, Norway, Switzerland, Japan and other countries during May 2006 amounted to $89.18 million as compared with $30.49 million during the same month of last fiscal year.

And that is only official. I work part time in a travel agency and currency exchange in manchester and the rule is any thing below 2000£ or 220000 Rps does not require any identity meaning no tax on that. Any thing above that Pakistan will charge tax on it. And trust we have about 5 offices in UK and alone in Manchester we have send more 4 million pounds in a year and thats all below 2000 pounds. You getting my point.

^You are correct, the $4.136bn figure for last year is only the ammount that Pakistan Govt taxed and accounted for, smaller ammounts like you mentioned are tax free and thus not even listed on the ledger, If we are getting around $500million a month in remittences then we should be looking at taking in over $5bn and perhaps even $6bn if that can be sustained.

this is one advantage of having large population.

so even if the official amount is only half the real amount then we are looking at close to $10 billion flowing in annually.

by the way is the hundi system completely unrecorded?

yes bro hundi system is totally unrecoreded. That comes under money laundry but Uk gov has set some tight rules so the company i work in registered over here and in Pakistan any money above 220000 rps needs proof and and has to pay tax.

the unrecorded money channels have dried out largely. after 9/11 the us and europe have imposed very strict money controls to curb support for terrorist orgs.

So we can say that maybe 10% more than official, but never 100% as someone suggested above.

wrong!!!!!
lots of money do flow in which are neva recoreded and here in australian even if u go through bank u neva get charged tax on it beside most common way of sending money home is through friends who happens to be going to pakistan and ppl carry large sum with them when they travel to pakistan and other way the ppl send money is covert it to american dollar thus u recieve more money in pakistan.. however i can say with some confidence dat the government recored figure mite be half of wat is acctually happening. ive seen couple pakistani send more than 1 cror and not paying single rupee tax.

Hundi system is not totally unrecorded. They use legal means to legalize their illegality.

Only way to tackle hundi is, faster, cheaper, efficient bank transfers. Not to mention better rates.

Tax or no tax, that's not how the govt calculates the inflow of foreign remittances. Apart from illegal, hundi or unrecorded transactions, any amount from one dollar to one billion dollars when transferred through legal channels such as inter bank transfers, money transfer agents (Western Union, Zarco exchange, etc) or cashier's check/ bank drafts is recorded in the state bank's inter-country ledgers. This reflects the official data of money transfers in and out of the country.

The govt may tax the banks or money changers/ agents of the agreed upon %age of tax on their total commission but the amount of money transferred is not taxed.

I personally don't think that the amount of money invloved in illegal transactions is material enough to add any significance to the over all figures. Since the crack down after 9/11 there is a very strict watch on illegal transactions and though people smuggle in dollars, its not material when compared to legal amounts.

umiqum:

Trust me. The amount of money that is sent through hundi is HUGE. After 9/11 for a few months the money dwindled, partly because at one time (if my memory serves right), the inter bank rates were better than the hundi rates. After a while things picked up again and hundi system is still huge.

Lots of South Indians and Pathans are in this business. Fast, easy and a good way to make a quick buck.

That's right.

Well it may seem huge but overall looking at the annual transmittals I wouldn't count it as huge. Hundi system was still operated through inter bank transfers and money changers. And back then there weren't enough laws and monitoring of inter-bank and inter-national transfers. So hundi operators were able to transfer money within their bank accounts without classifying what the money is for.

Now I now that it still operates in hiding and specially between Pakistan and Gulf in guise of real estate deals, but the overall volume can't be substantial when you talk about 5 or 6 billion dollars of annual remittances.

Now smuggling of dollars into the country is a different story.

umiqum:

I've personally seen some people remitting $100k on average daily to/from Pakistan. Some parts of the money go through banking channels through real estate, imp/export, but the rest, is a mystery.

Very little a bank can do, when the hundi folks provide better rates, with faster and door-to-door service.

Just think we are getting $5bn in remittences, $5bn fdi next year, and $50bn worth of commitments by UAE and Saudi arabia, thats not counting the billions pakistan spends each year on its own development, add up the billions in remittences etc, we are looking at atleast $100bn being poured into our economy over the next five years.

Excellent work!

$5 billion thats like 3.5% of our annual GDP, its like our militray budget is filled by remittances from abroad.