ADB says possible slowdown in remittances pose economicrisks

ISLAMABAD: Asian Development Bank (ADB) said an expected downward trend in remittances to Pakistan from overseas workers pose risks to external sector and household income.

“Departures of overseas workers from Pakistan to major Gulf destinations such as Saudi Arabia and United Arab Emirates declined in 2016, and remittances from these countries began to decline in early 2017,” ADB said in a latest report. 

“A sharp decline in remittances can place a recipient economy and its households at risk, particularly for those highly dependent on remittances.”  ADB on Friday unveiled the Asian Economic Integration Report 2017 at the 16th Central Asia Regional Economic Cooperation (CAREC) Ministerial Conference held in Dushanbe.

Finance Minister Ishaq Dar also attended the moot.  The Manila-based lender said remittances to the region that accounts for around 45 percent of global remittances flow, dropped to $259 billion in 2016 from $269 billion in 2015 — the largest drop since 2009.   Central Asian countries saw decline in inflows for the third consecutive year, mainly due to weak economic recovery in the Russian Federation, the subregion’s top migrant destination, it added. 

ADB said low global oil prices also affected remittances to countries, like India and Pakistan with a large number of workers in the Middle East.  It added that remittances to South Asia dropped for the first time since the global financial crisis. India’s remittances contracted 8.9 percent ($6.2 billion), along with Bangladesh (11pc) and Nepal (6.7pc). 

Low global oil prices resulted in reduced remittances from the Middle East to these countries. Large proportions of workers from South Asia in the Middle East are employed in sectors susceptible to economic cycles — such as construction and transport.   The falling remittances are worrisome for the economic managers in the wake of rising current account deficit that widened to $12.2 billion in the last fiscal year. 

Waqar Masood, ex-secretary finance, predicted the current account deficit at $15 billion for the current fiscal. The Asian Economic Integration Report said the Bank approved a $240-million loan for the fifth phase of the Turkmenistan–Uzbekistan–Tajikistan–Afghanistan– Pakistan (TUTAP) power interconnection framework in December 2016. TUTAP will allow Afghanistan to supply power to its eastern and southern provinces, including Kabul. 

A statement said ADB will also finance the first phase of the $150 million worth of Turkmenistan-Afghanistan-Pakistan transmission line project.  The ministers from 11 member countries, at the conference, unanimously endorsed CAREC 2030, a new long-term strategy that will take the CAREC program to its third decade of operations. 

The strategy envisages scaling up and broadening of CAREC’s mandate, including supporting regional economic and financial stability, and regional initiatives in the areas of tourism, agriculture and water resources, and health and education. 

CAREC will maintain focus and its comparative advantage in the existing priority development areas of transport, energy, trade, and economic corridors.

Adoption of the CAREC 2030 strategy will also help countries in the region achieve the sustainable development goals and climate change targets under the Paris agreement, while aligning with national development priorities.

ADB will commit $5 billion to supporting CAREC 2030 in the next five years. This is about a quarter of the total ADB financing for projects in CAREC countries except China.  ADB has already approved a new $800 million multi-tranche financing facility for CAREC road corridor development in Pakistan.