DAWN Editorials - 12th January 2025

[faheemustad]

Increased inflows

REMITTANCES sent home by migrant Pakistani workers have been a saving grace for the country’s faltering economy for the last two decades.

With export revenues growing at a painfully slow pace — and often stagnating for years in between — and foreign capital and investment inflows drying, successive governments have relied on remittances to push import-based consumption to boost growth. Thus, even a tiny increase in cash sent home by overseas Pakistanis can always be a moment for celebration.

The ongoing fiscal year has proved to be exceptional for remittances, with inflows soaring by a third to a record level of $17.8bn in the first half of the year to December from $13.4bn a year ago. This lends hope that the country will be able to meet the targeted inflows of $35bn in remittances, far surpassing export earnings, this year. No wonder the prime minister has used this occasion to “congratulate’ the nation and boast of his government’s success in stabilising the economy while underlining the commitment of overseas Pakistanis to their country’s development.

The market players attribute the surge in remittances through formal banking channels to numerous factors: clampdown on illegal currency trade and smuggling to Afghanistan, stricter controls on exchange companies, exchange rate stability, and increased labour migration, especially young IT professionals, from the country in recent years. It is believed that remittances have a potential to grow to $60bn a year if illegal currency trade is stemmed and customs controls strengthened against under-invoicing of imports by major traders from China, Dubai and elsewhere.

The increase in remittances is indeed a positive development for the economy as these have been driving the current account surplus for the last several months, contributing significantly to exchange rate stability and improvement in the State Bank’s forex reserves in the absence of foreign direct investment, as well as any meaningful bilateral and multilateral inflows.

But it is not a wise policy to rely on them for external account stability. Remittances have their downsides as well. Studies have shown that higher remittances boost consumption and imports, lead to decline in domestic manufacturing and exports, and make economies of recipient nations more vulnerable to global and regional economic crises. No matter how favourable an impact these have on economic growth, remittances cannot be a substitute for exports and foreign private investment, which increase domestic productivity and generate jobs. Moreover, the quantum of remittances a country receives can never be predicted.

Remittances represent hard-earned money by migrant Pakistanis that must be channeled into productive use for the country’s social and economic development instead of squandering on imported luxuries. At the same time, the government needs to devise a strategy to increase industrial and agricultural productivity to boost exports and reduce reliance on uncertain remittances.

Published in Dawn, January 12th, 2025


Gwadar’s potential

THE Gwadar deep-sea port, completed in 2007, was supposed to be a shining success for the other newly built ports in the region and beyond. Yet eight years after the official launch of port operations — an event marked by the first-ever container ship with cargo from China passing through it — it lags behind even other China-built ports in Sri Lanka, Nigeria and Cameroon. Barely any vessel calls at Gwadar. Given the situation, it is not surprising that the planning and special initiatives minister is vexed over the failure of relevant authorities to “market the Gwadar port to expedite its commercialisation”. Built as part of the multibillion-dollar CPEC transport and energy infrastructure project, the port remains a non-starter and, in the words of the minister, a “white elephant instead of becoming a regional transhipment hub”. During a meeting the other day, he blamed the maritime ministry and the NLC for their unprofessional handling of what would be the ‘crown jewel’ of the corridor initiative.

There’s a reason the government is concerned over the fact that the Gwadar port has not kept pace with similar facilities in the region. Robust trade through Gwadar is crucial to develop the region and alleviate rampant poverty in Balochistan. Hence, Prime Minister Shehbaz Sharif has recently ordered to route 60pc of all public sector cargoes through Gwadar to “trigger port activities’. That is unlikely to happen anytime soon due to capacity constraints and much higher cost of transportation from Gwadar to the rest of the country compared with Karachi. On his part, the planning minister has directed the relevant authorities to hire an international consultant to prepare a plan to compete with other regional ports in attracting business for Gwadar. But a market plan, no matter how grand, cannot improve the security situation in Balochistan or bring peace to Afghanistan, without which it is impossible to get business from Central Asia. Nor can it convince China to relocate its industry here for export westward, or start importing oil through Gwadar. Moreover, it won’t help address the capacity and power supply issues that constrain trade through the port. Unless the issues containing the potential of Gwadar are addressed, no executive order or marketing plan can make the port city a regional shipping and trade hub.

Published in Dawn, January 12th, 2025


Broken metropolis

KARACHI, Pakistan’s economic juggernaut, is the largest contributor to the nation’s tax revenue. The Federal Board of Revenue’s latest data reveals that Karachi’s Large Tax Office accounted for 30.74 per cent of the total tax collection during 2023-24, generating a staggering Rs2,522 billion. Despite this, the metropolis is a picture of neglect, suffering from chronic infrastructural decay and a lack of basic amenities. The state of Karachi’s roads is a case in point. They resemble war zones, with crater-sized potholes even on major thoroughfares, turning daily commutes into hazardous ventures. Meanwhile, public transport remains grossly inadequate for a city of over 20 million people. Residents are forced to rely on private transport, exacerbating traffic congestion and air pollution. The Green Line BRT, while operational, barely scratches the surface of the city’s mass-transit needs.

The energy crisis compounds Karachi’s woes. Gas shortages and persistent electricity loadshedding disrupt daily life, affecting households and industries alike. It’s ironic that the city that drives Pakistan’s economy is left grappling with such crippling power outages. Water scarcity is yet another pressing issue. The majority of Karachi’s residents are deprived of access to clean and sufficient water, relying on private water tankers at exorbitant rates. This basic human necessity has turned into a lucrative black market, further burdening citizens. Despite Karachi’s unparalleled contribution to the national exchequer, it continues to languish without adequate investment in its infrastructure and services. This neglect is not just unfair but counterproductive, as a deteriorating Karachi threatens to undermine the very economy it bolsters. The federal and provincial governments must urgently prioritise Karachi’s development. A city that gives so much deserves better roads, reliable utilities, and efficient public services. Investing in Karachi is not just about fairness; it is essential for Pakistan’s future growth and prosperity. Anything less would be a betrayal of its citizens and economic self-sabotage.

Published in Dawn, January 12th, 2025