This is an interesting article that covers the growing remittances of Pakistan well, but fails to mention a couple of things what is contributing this growth.
Let’s face it, if you think Pakistan’s human capital export to the Middle East is skyrocketing, you’re sadly mistaken. It is not.
Black-to-White. Let’s get the elephant out of the room. Pakistan has a great program which converts remittances to tax free income in Pakistan. When a person receives a remittance, and they surrender the foreign currency and accept the local Pakistan Rupee, this money is now official and tax free.
Only Remittances are given this benefit of being tax free.
10,000 of people are engaged in taking money to Dubai or doing netting off between Karachi and Dubai and turning black money to white. For example a husband & wife will take US$ 19,000 from here (US$ 9,500 in cash each) and then convert this to Dirhams. This money is then transferred back into Pakistan into their account.
The end result is tax free money in Pakistan. For larger amounts, laborers in Dubai are used to divide the amount and send it to multiple beneficiaries in Pakistan. I’ve seen it with my own eyes how this happens. A bus full of laborers are paid Dirhams 100-150 for their efforts.
Human mules chartered between the labor camp -to- MTO and back.
The second and more important point is that remittances are defined as incoming transaction from PERSON to PERSON.
Today, when companies send money to a person, banks have been told to look the other way, i.e. rather than treating small incoming transfers as commercial transfers, they are treated as remittances, thus increasing the overall remittance figures.
Pakistan needs foreign exchange badly, and if the government (i.e. the central bank) tells the banks to look the other way, they oblige and hence, it appears that remittances in Pakistan are increasing, while the reality is these are commercial transactions categorized under the remittance umbrella.
I subscribe to this policy, because the more restrictions we place, chances are money will remain outside of Pakistan or enter the country via undeclared channels.
This page was last updated on March 29, 2016.