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Overseas Remittances rise 60% in last six months.

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    Overseas Remittances rise 60% in last six months.

    More and more good news on the economy. Is there any doubt that Pakistan under Musharraf, despite all the domestic and global difficulties is going from strength to strength economically?

    Remittances rise to $982.3 million

    Remittances from overseas Pakistanis totalled $982.32 million during July-December 2001, showing 60 per cent growth over the corresponding period of last fiscal year. According to official data, major chunk of these workers' remittances originated from the United States ($273.95 million) and the United Arab Emirates ($221.76 million) during the period. For the full year, the remittances are likely to total around $2 billion.

    During the first six months of last fiscal year, Pakistan received $609.16 million while for the whole year the remittances stood at $1,086.57 million. Since September 11 attacks and follow-up actions of the United States and FBI to eradicate terror-related flows, one immediate beneficiary was Pakistan. The American FBI closely investigated business of moneychangers, creating worries for those involved in traditional Hundi or Hawala system of transactions. As a result, more and more people reverted to formal banking channels to send the money home. The situation was so tense that people holding capital in the safe havens of Dubai and other foreign destinations also sent back their savings. The dollar availability, both in the kerb and official market, gained momentum, helping rupee strengthen six per cent in the official inter-bank and 10 per cent in the kerb trade against the US dollar.

    The convenience premium charged by open market dealers also declined to mere one per cent. The rupee-dollar parity in the inter-bank and kerb at 60.20/60.80 at present is showing signs of stability on the back of $4.8 billion reserves and weak demand for imports. Stronger rupee and low inflation at 2.6 per cent enabled the State Bank of Pakistan (SBP) to cut down discount rates for the fourth time during the year to nine per cent, paving the way for a cut in lending rates of commercial banks. In another major development, the central bank is working on a plan to establish legally operating exchange companies in the country under strong Prudential Regulations to replace the moneychangers. A special committee on the subject submitted its report to the central bank last week.

    The SBP is holding consultations with the Forex Association of Pakistan (FAP) and the Ministry of Finance to shape up its plans, said a senior central bank official in Karachi. He said the Bank wants to institute a transparent and modern system of foreign exchange, without adversely affecting thousands of people associated with money exchange business. Some of the large moneychangers could apply for the new exchange companies, on the basis of set criteria of paid-up capital and other regulations. However, many small operators would have to seek mergers or would be forced to liquidate their business. Some leading moneychangers have shown some apprehensions over the proposed plan. They argue that the new system would reduce trade to a few large companies only. This could lead to emergence of a black market, where people would do this business without any official cover.

    They claim that commercial banks are not well equipped, or inefficient, to handle all the business and provide timely services that moneychangers could do on a single phone call. However, senior bankers maintain that establishment of the exchange companies, with offshore branches, would gradually create a well functional exchange market in Pakistan. The government expects technical and financial support from the multilateral agencies to transform this business.

    [This message has been edited by Malik73 (edited January 25, 2002).]