Pakistan’s current account, and hence the feeble strength of the rupee, hangs on by a thread that is remittances. Historically, migrant workers from Pakistan head toward Gulf countries. But in 2017 and 2018, the adoption of Gulfisation policies (which aimed at lowering dependence on migrant workers in the labour market) after lowering of oil prices by GCC countries led to a steep drop in emigration. Ironically, in 2019, the year of the first Covid-19 patient, the opening of job opportunities for Pakistani workers in Saudi Arabia led to a spike just before the world shut down and numbers dropped again. Despite fewer emigrants, remittances have had an upward trend in recent years, even during the pandemic when movement was highly restricted. The Financial Action Task Force (FATF) has to be largely credited since it pushed Pakistan towards anti-money laundering laws that helped move remittances towards official channels instead of hundi and hawala operators. Given the historic levels of the current account deficit and the free fall of the rupee, if the FATF had not pushed the country into formalising remittances, the economy would have been in worst shambles than it currently is.

Published in Dawn, The Business and Finance Weekly, July 18th, 2022