Do you ever think about how to send money to Pakistan? In this article, we will discuss how remittances affect the global economy and also the economy of the recipient country.
We will first define remittances and then take a brief look at why are remittances necessary.
Remittance: – It is derived from the root word “remit” meaning “to send back”. Thus remittances can be defined as the sum of money an overseas worker send back home.
Let’s now take a closer look at remittances with statistics.
- A study showed that the effects of remittances have been continually positive on the economic growth of around 80 underdeveloped countries.
- In the past decade alone, remittances outgrew the traditional capital inflows into the developing countries. These inflows typically come in the form of foreign aid.
- World Bank’s 2019 Migration and Developmental Brief noted that the annual money transfer to Pakistan and to the other Middle and Low-Income Countries (MLICs) had reached a record high of 529 billion USD in 2018.
- Remittance holds a different value which is unlike the typical foreign aid since remittances do not have to pass through different government channels which create bottlenecks due to bureaucratic necessities, and instead, they reach directly to the beneficiary through the simple money transfer channels such as ACE Money Transfer company.
- Remittances have a household-to-household contact away from the government institutions. It does not mean remittances move freely without government checks. These funds are rather regulated by the official regulatory bodies through the money transfer companies.
- A lead economist at the World Bank describes remittances as ‘’dollars wrapped with care’’.
- Generally, migrant workers belong to third world countries whose economy is weak and pushed most people below the poverty line. This diaspora sends back remittances to fulfil the basic necessities of life such as food, shelter and education etc. All in all, remittances help the poorer segments of society lead decent life.
- When remittances are received for these needs and necessities, they have a direct impact on poverty reduction and reduced levels of poverty are the biggest indication for the economic uplift of a country.
- Through remittances, investment opportunities are created which pave the way for jobs, and thus skilled human capital begins to develop which has a direct effect on the macro-level.
- Remittances help the flow of capital and funds in an economy since the beneficiaries tend to invest in business opportunities that keep arising. This flow of capital in any economy is vital to economic growth and sustainability.
- A mere 10% increase, on average, in remittances can help GDP with a 0.66% increase which is huge, depending on the size of the economy. Online money transfers to Pakistan through companies like ACE are the most important sources to increase the foreign reserves of a developing country like Pakistan.
- There is a direct and positive relation between remittances and economic development as through remittances people invest their capital which gives birth to a positive and economically healthy output.
Conclusion: – From all of the above, we can safely conclude that remittances do impact the national and global economies positively but the scale and intensity of these positive impacts differ from country to country. Another point to note is that the countries which facilitate the international transfer of funds to Pakistan from anywhere or remittances across borders have recorded lasting positive economic effects. This is one of the reasons why many governments are now ensuring that the rules regulating international money transfers are flexible to facilitate diasporas send money to Pakistan online.