The debt-laden economy of Pakistan needs foreign inflows in order to address its economic woes. The global economic landscape seems better today vis-à-vis a year ago when the entire world was afflicted by the conundrums of the pandemic. Pakistan’s economic indicators at this juncture augur well down the road. There is no denying that Pakistan has been encountering the ordeal of balance of payment now and again. To address this glitch, Pakistan needs ample dollars.
Some prudent decisions have been taken in Pakistan recently in the era when almost entire world went through an unprecedented economic downturn which came out of the blue. In order to address the perennial problems of balance of payment, Pakistan has been looking towards to the international agencies and donors which came to the rescue of the Pakistani economy umpteen times. However the recent decisions of launching Roshan Digital Account (RDA), Naya Pakistan Certificates etc. are directed to the NRP-Non Resident Pakistanis on the same lines as has been witnessed in some emerging economies in the world.
Almost every emerging nation has come up with certain incentives for its diaspora to lure dollars, which eventually helps the economic landscape resulting in employment creation and uptick in exports of merchandize and services. Pakistan is not lagging in this regard which is going to help the economic growth. There are over 11 million Pakistani diaspora living in numerous countries who are being encouraged to remit dollars to Pakistan.
Roshan Digital Accounts and Naya Pakistan Certificates have enabled the Pakistani diaspora to invest in government debt papers etc. Moreover, the spike in remittances is also a welcome move since Pakistan is receiving over $2 billion every month and there are expectations that Pakistan might receive around $27 billion during the current fiscal year which is a much-needed inflow in the given circumstances. Foreign remittances coupled with the rest of the inflows would help Pakistan keep the balance of payments in shape.
Pakistan has missed the boat when it comes to exporting skilled workforce abroad which translates into better inflows since the skilled workforce gets better salary vis-à-vis blue collar workers, to be precise. It is never too late. Pakistan even now may work on it keeping in view a long term approach. Burgeoning external debt and liabilities have gone up to $113.8 billion which must be a major worry for the economic managers since hefty amount is paid every year for debt servicing which at times is beyond the economic muscles of the country. Paying around $14 billion every year by the economy worth $278 billion is a humongous task.
Roshan Digital Account might be a kind of game changer, however, it is prudent to work on the spike in exports and ensure a tradeoff between dollar inflow and uptick in exports. A common perspective is when there is dollar inflow, the local currency strengthens which eventually erodes exports. In case Pakistan is able to increase exports for around $37 billion and receives around $30 billion through remittances, it would be tremendous news for the economic growth. There are plenty of instances where some countries worked on the strategy of spike in foreign remittances, upsurge in exports and solidifying its local currency. We may follow such lines as well.
Pakistan Stock Exchange is an avenue where investment could be targeted. At around 46,000 level, the market offers better returns vis-à-vis the regional markets. Pakistan needs inflows in portfolio investment as well since it triggers the confidence of the investors. Further, the performance of the large scale manufacturing is a confidence booster for the overseas Pakistanis. Some sectors such as automobile, cement, steel, construction, pharmaceutical, e-commerce etc. have performed marvelously which is going to help the economic growth both in the short and the long run.
Having met almost all but three conditions of Financial Action Task Force (FATF), Pakistan seems to be moving on the right track.
The stalled $6.9 billion International Monetary Fund loan is back on track and the local currency is gaining grounds. The all above may prove even a better trigger for the overseas Pakistanis who are geared up to invest their savings in their country’s development.