Remittances and

Economic
Growth
Presented to:
Dr. Bilal Aziz
Presented By:
M/ Ahsan Fiaz 2021-EN-22
Barakatullah Saleem 2021-EN-48
TABLE OF CONTENTS
01 02
Remittances Main financial flows of
Definition of Remittances & Examples developing economies

03 04
Advantages of Remittances for Risks/Disadvantages of
Families Remittances

05
Evaluating Remittances as a
source of External Finance
What is Remittances
Money sent by people living and working overseas back
to their country of origin-usually sent back to their
families

Pakistan is the 6th largest remittance recipient in the

world, recording $31.2 billion in the FY22.

With nearly 9 million Pakistanis living abroad,

remittances are a significant source of foreign exchange
and a lifeline for many household.
Summary of Key international Financial Flows

Overseas
Remittances Development
Assistance (Aid)

Debt & Portfolio Foreign Direct

Investment Investment
 02 Main Financial Flows to Developing
Economies
Remittances flows are larger than ODA, and more stable than private capital flows

The chart showing that foreign

direct investment and remittances
are now far more significant than
overseas aid as a source of
external finance for developing
countries.

Private debt includes loans, from

the issue of international bonds
and the borrowing through
commercial banks
• Remittances contribute to economic stability by providing
a reliable source of income for recipient households

• REM line on the graph shows an increasing trend, it

indicates a rise in the amount of money sent back to
Pakistan.

• FDI shows that Pakistan is attracting more foreign

investments, which can contribute significantly to
economic growth by creating jobs and fostering business
development.

• It is suggested that migration and remittances can be

significant in reducing extreme poverty and
improving human development.
03 Advantages of Remittances for families

Additional disposal income helps to fund education & health care

Helps families to invest in land, seeds, livestock and equipment

Lower risk of extreme poverty

Can be used as collateral for loans including micro-finance debt

Less malnutrition which can impair brain development

04 Risks/Disadvantages of Remittances

High cost of money transfer from transfer business such as Western Union (12% charge for
sending $200 to Pakistan)

80% of people in rural areas do not have access to traditional banking service

Reduce size of the workplace due to net outward migration of skilled workers-may cause fall in
long run aggregate supply

Inflow of remittance may cause the exchange rate to appreciate-damage export

competitiveness

Some household receiving remittances may decide to remain inactive in the labour market-
economist call this moral hazard
Evaluating Remittances as a source of External finance

“Effect of remittances on GDP growth depends

upon how the money is spent by the receipts”

“Remittances act as a major counter-balance

when capital flows weaken”

“Remittances have more impact when they

provide capital for starting business , promoting
the growth of the private sector”