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Poverty fell in Pakistan in 2001-08 partly because of remittances - Migrants can help in reconstruction after devastating floods

Sanket Mohapatra's picture

A World Bank report released on July 30 finds that poverty in Pakistan fell by an impressive 17.3 percentage points between 2001 and 2008 (from 34.5 percent in 2001-02 to 17.2 percent in 2007-08). Three out of Pakistan’s four major provinces – Khyber Pakhtunkhwa (formerly NWFP), Punjab, and Sindh – saw significant declines in poverty during this period. The largest fall in poverty was in Khyber Pakhtunkhwa (KP). According to the Bank report “high level of remittances, both foreign and domestic, seem to have facilitated” the decline in poverty in KP.

     UN Photo/WFP/Amjad Jamal
Pakistan saw migrant remittances reach a record $ 8.9 billion in fiscal year 2010, an increase of 14 percent compared to the 2009 fiscal year despite the global economic crisis (Pakistan’s fiscal year runs from July to June). The World Bank report says “Continued strong growth in worker’s remittances in the past few years has also contributed to improvements in the external current account balance” and “have facilitated improvement in the country’s external position”. 

Migration and remittances have provided a source of income for households in Khyber Pakhtunkhwa (KP) and other provinces in Pakistan. A recent Asian Development Bank study found that foreign remittances constituted 9.4 percent of household income in KP, compared to 5.1% for Punjab, 1.5% for Baluchistan, and 0.7% for Sindh.

There is now a risk that devastating floods that have hit Pakistan, killing more than 1,200 people and leaving 2 million people homeless, could reverse some of the gains in poverty achieved in the last few years, which were already believed to have been weakened in the wake of the recent financial crisis and rise in food prices.  

During past natural disasters, migrants have sent additional remittances to help their families and friends in need – for example, during the Pakistan earthquake in 2005, in Philippines after typhoons Ondoy and Pepeng in 2009, after an earthquake in Haiti in early 2010, and inother countries in Asia, Africa and Latin America. It is likely that the Pakistani diaspora will send additional financial resources to help their family, friends and even larger communities. These person-to-person transfers could complement official aid efforts.

The official aid community and Pakistan’s government should welcome and facilitate the overseas Pakistanis’ help by quickly restoring the payments and financial infrastructure in affected areas, so that family members affected by the floods can continue to receive remittances. Some useful lessons can be learned from the example of the recent US-led efforts tokeep remittances flowing to Haiti after the earthquake in early 2010.

Some issues for discussion:

1. How can the Pakistani migrant community continue to provide assistance through remittances to their friends and relatives, and help their communities through direct giving? How can the international aid community and Pakistan’s government facilitate this process?  

2. How can the payments and settlement infrastructure for remittances be quickly restored in the flood- affected areas to enable these person-to-person flows to reach the intended beneficiaries?

3. How can the international aid community and Pakistan’s government involve (and coordinate with) the Pakistani migrant communities in North America, Europe and the Gulf for post-disaster relief and reconstruction?
 

Comments

Submitted by Raman on
Good analysis and insights. However, there is need for some proactive measures by the Govt and other Civil Partners and Bodies so that the people could avoid the hardships in the first place. Remmittances are useful and i think, technology can be harnessed towards the uninterrupted legal, timely remittances by the Migrants. Good one Sanket. Raman

The Dawn newspaper has an article on Sunday on how remittances are not reaching affected areas (see http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/the-newspaper/business/remittances-not-reaching-affected-areas-280) The Dawn article says "Most of the [refugee] camps have been set in suburbs of the cities or remote areas across the country while most of them are unregistered. The non-registration is creating problem to trace the people. Many remittances do not find exact location to reach the recipient....The flood largely devastated villages and small towns which usually provide unskilled labour to the Middle East. Hundreds and thousands of Pakistanis in these areas depend on remittances sent by their people. A senior banker said this is a serious issue. There is an urgent need to clear the passage for remittances to reach exact destinations." There is clearly a need for the Pakistan government, the central bank and aid agencies to find ways for this vital lifeline for the poor to be restored at the earliest possible. Sanket

Submitted by Riaz Haq on
The cost and the task of post-flood reconstruction may appear to be monumental, but I feel confident that global Pakistani community is equal to it. Already, non-resident Pakistanis have been sending home nearly ten billion US dollars a year in remittances to their home country. And their invested assets are estimated to be in hundreds of billions of US dollars in different parts of the world. I believe Pakistani diaspora can double their remittances in the next twelve months, thereby boosting Pakistan's overall economy by a $10 billion stimulus for reconstruction. If a significant part of this additional $10 billion in remittances goes into special, professionally managed, investment funds specifically for post-floods reconstruction and rehabilitation, it will be an even greater boost to Pakistan's overall economy. To put it in perspective, the $10 billion in a year would be 5 times the annual foreign aid, and twice the peak FDI Pakistan received in 2007, the last year of healthy economic growth in 2007-2008.

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