PAKISTAN'S dependence on remittances has increased as some other sources of finance have either dried up or proving difficult to access. It would be hard and expensive to tap funds to fill the large financing gap — the gap between export earnings and what is needed to pay for imports and also the amount required to service debt.

Non-project aid, particularly from the United States, has slowed down to a trickle as the relations between the two countries continue to proceed on a downward slope.

The IMF remains unhappy with Islamabad's performance in mobilising domestic resources for development. The institution wants an effective tax on consumption which the policymakers find politically difficult to deliver.

Project assistance is available from China and the two development banks — the World Bank and the Asian Development Bank — but this form of capital disburses slowly and is thus not particularly helpful in closing the financing gap. This makes remittances from the eight million or so Pakistanis living and working abroad as one source of foreign assistance that helps to cover the country's needs.

Of late while foreign investors have either left Pakistan because of the worsening security situation or because they don't see the economy offering the opportunities available in other countries, the Pakistani diasporas continue to send back increasing amounts of foreign capital to the country.

For 2009, the World Bank estimated Pakistan's receipt from remittances at $8.7 billion; in 2012, the State Bank of Pakistan believes that the flow will reach $12 billion. In 2009 as shown in the accompanying table, remittances were equivalent to 5.1 per cent of the Pakistani gross national income (GNI). The proportion was higher than the average for South Asia.

The sizes of the Pakistani diasporas across the four continents of Asia, Africa, Europe and North America can only be roughly estimated. The government does not maintain data on migration stocks in various destinations popular with Pakistanis. A combination of data from various sources, including the United Nations and the World Bank along with anecdotal evidence from various embassies in the countries where Pakistanis are present in large numbers suggest that about eight million people of Pakistani origin are living and working abroad. The largest proportion of these — about five million — are in various countries of the Middle East. Britain with 1.2 million has the second largest concentration and the United States with about 0.9 million comes in third.

While there was some out-migration from the parts of British India that are now Pakistan, most of the current large diasporas were formed after the country gained independence. Both pull and push factors have contributed to the formation of Pakistani communities outside the country's borders. The current outmigration is largely the consequence of the push from Pakistan – a very large proportion of people leaving the country do not see good economic prospects for themselves if they stay behind.

In the five year period between 2005 and 2010, Pakistan was among the four countries across the globe that had more than one million people migrating to other countries. With a net outmigration of 1.4 million in this period , Pakistan was the third largest contributor of outflow in the world.

The largest number came from Mexico (2.43 million) with China in the second place (1.73 million). India with a total net outflow of one million people was well below Pakistan in this respect. The reason why a smaller number of Indians are now moving abroad is that they have more confidence in their country's future.

With fairly tough restrictions having been put in place by the United States and Britain, outmigration destinations have become limited for the people of Pakistani origin. This is another toll that the rise of the Islamic extremism has taken on the Pakistani economy. Economists now consider out-migration in a positive light. It has proved to be an important contributor to the efforts to alleviate poverty.

Wages in the developed world for the kind of jobs available to the migrants with relatively low level of skills are about 15 times of what they can hope to make at home and that too if they are able to find employment. According to one estimate, “completely open borders would add an astonishing $39 trillion over 25 years to global economy. This is more than 500 times the amount the rich world spends on foreign aid each year. Migration is the most effective tool yet devised for reducing global poverty.”

But extraordinarily positive results are available if migrations draw upon people with low levels of skills. They are usually a burden on the domestic economies but provide badly needed services in rich countries. For instance, very large number of the workers in the sectors of agriculture, construction and domestic services in the United States are from relatively low income countries in the neighbourhood. But this type of workforce is not likely to be admitted into the US from Pakistan.

There is another type of movement of people from South Asia that is underway at this time. Its destinations are the city states in East Asia that are aggressively building their service sectors in response to the opportunities created by the restructuring of the global economy. For instance, Singapore aims to become a financial centre; a centre for high-tech industries in the fields of information, communication and health; and a centre of entertainment that includes gambling to cater to the interests in various table games of the people from the countries in the region. Similar developments are taking place in the several city states in the Middle East. These new economic sectors need very large number of highly skilled people. They are moving from rich countries as well as from South Asia. This flow of people from developed countries is the first time since the period of European colonisation in the 18th and 19th centuries that such workers are coming to the developing world in search for jobs.

There are two conclusions that can be drawn from this brief discussion of the contribution that diasporas of Pakistani origin are making. Both are positive when viewed from two different perspectives. The remittances being sent back by these communities are critically important at a time when the country has a very limited recourse to other sources of finance.

Second, outmigration has contributed enormously to keep many people out of poverty. Movement of construction workers with low level of skills contributed to alleviating poverty in some of the poorer areas of the country.

Notwithstanding these positive developments there are some worrying trends. Current policies in many labour importing countries have made it very difficult for the Pakistani poor to migrate while the demand for the highly trained workers remains relatively high. This may keep the level of remittances high but would reduce the impact of migration on poverty.

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