Moody’s Investor Service (Moody’s) has just warned that Pakistanis either earning less or getting laid off all over the world will mean lower remittances, which will no doubt put immense pressure on both reserves and revenue. Usually one of the biggest contributors to overall revenue, remittances are the effectively the life and blood of Pakistan’s economy. But now that they are compromised, the overall Balance of Payments (BoP) situation could be in serious trouble. Clearly authorities are going to have a problem balancing the budget this year. Significantly, Moody’s mentions Pakistan as one of the countries likely to be most affected by this trend, which should at least make authorities plan in advance for the expected shortfall.
‘Lower global consumption after coronavirus to hurt consumption, raise external risks in major recipient countries’, said Moody’s. It turns out that remittance transfers will drop around 20 percent, which will no doubt impact the economy’s ability to handle all the building pressure and households’ capacity to survive and grow. Since this comes on the top of expected reduction in global trade, which will have its own impact on revenue collection, it is safe to say that the problems of a number of countries stand to be multiplied. Moody’s went on to say that Pakistan is among those countries for whom relief from import of lower oil prices offsets a drop in remittances of around 20 percent.
It is an understood and accepted fact that no country can perform without money in the bank. And along with exports, remittances are Pakistan’s biggest earners. Now, since both are stuck somewhere in the pipeline, the country stands to lose in more ways than one. Only a healthy economy can keep a country healthy. And it’s not just abroad that Pakistanis are losing jobs. They are doing the same back home and are pretty upset about it. Now more and more workers are facing the prospect of no jobs and lower earnings, which makes their domestic budgets simply unaffordable. Hopefully the government is aware of all this and will come out with a targeted relief package sooner rather than later, just like it has done a number of times in the recent past. For, such measures are now necessary to keep the economy solvent. Right now, it is not in a position to withstand the double-whammy of lower trade earnings and lower remittances.