Global remittances to exceed aid, FDI
By M. Ziauddin
ACCORDING to latest 12-month figures, Britain is suffering from a whopping $142 billion trade imbalance and a massive $64 billion current account deficit. The current account deficit widened in the last quarter of 2005 to 3.5 per cent of the GDP. This is the largest deficit for a long time. Britainââ¬â¢s budgetary deficit too, is not a very happy one at 3.4 per cent of the GDP.
Experts believe that in the long-term, the rising deficit could cause constraints on lower interest rates and growth, although like the US, the UK has been able to shrug off, so far, the current account deficits without many ills.
And of course and fascinatingly enough, despite these gapping holes in it British economy has experienced the longest period of uninterrupted economic growth lasting now almost 15 years.
Since 1992 economic growth has usually been relatively close to the long-run trend rate of 2.5 per cent. This increased stability has helped the long-term investment decisions even from abroad and that perhaps has taken care of the wide gaps in its international trade, current account as well as the budgetary deficits.
Of course, despite 15 years of economic growth, the government has been forced to borrow more than anticipated. The Pre-Budget Report forecast for 2005/6 is net borrowing of ã37 billion. Experts believe that this indicated the government was close to breaking its golden rule for borrowing and the chancellor might be forced to raise taxes or cut spending ,if the finances donââ¬â¢t improve.
As a per cent of the GDP public sector debt has risen from three per cent in 2001 to 3.7 per cent in 2005. However, this is significantly lower than other OECD countries such as Germany (4.2 per cent of the GDP), France (4.2 per cent of the GDP, the US (4.9 per cent of the GDP) and Japan (7.4 per cent of the GDP), according to financial year 2003.
However, countries like Pakistan which suffer from acute resource constraints and which have very little to sell abroad cannot take the route that Britain and the US economies have taken without the fear of compounding the problems. But since the last IMF programme came to an early end two years back Pakistan seems to have gone on its own. This seems to have allowed the government to stay the course on the growth front which in recent months has caused widening gaps in the trade, current account and budgetary deficits threatening to push the country back into the vicious cycle of the 1990s when the country had suffered from all kinds of deficits plus the IMF conditionalities bringing the economy to almost a standstill.
Meanwhile, the 9/11 related bonanza also seems to be tapering off and the income from the privatisation too, may not remain at the same level as in the immediate past. So, how do we fund these deficits and still continue on the growth path?
There is one window of opportunity which continues to reassure our official economic managers and that is the rising trend in remittances which have gone up from about a billion dollars in 2000 to $4.6 billion last year.
The other day, the Governor of the State Bank of Pakistan, Dr. Shamshad Akhtar who was here on a visit said that while it was not possible to fix targets for remittances she expected the inflow to go up much beyond $5 billion in the coming couple of years. She said she would push the bankers to go out in the field and mobilise remittances.
The Governor was here to attend a conference on remittances on 13th and 14th of this month, jointly organized by the UKââ¬â¢s Department for International Development (DFID) and the World Bank. The focus of the conference was on how to get the remittances quickly and cheaply and many of the speakers focused on the use of the low-cost technology of mobile telephones to achieve this.
The participants felt that one of the major challenges for policy-makers, the private sector, and the international community was to leverage the growing volume of remittance flows to provide access to financial services to millions of poor people and, thus, contribute to reduce poverty and promote economic growth.
By bringing millions of poor people into the financial system, countries can grant their citizens the opportunity to save, build their assets, and smooth their consumption. There is growing consensus that mobile-banking offers a unique opportunity to extend banking services to the poor - including the ability to send and receive remittances. There are more than twice as many people with mobile phones than have a bank account in Africa and the number is growing fast - African mobile phone subscribers grew from 7.5 million to 76.8 million from 1999 to 2004 (International Telecommunications Union 2005), and this will further increase to 250 million in the next four years, according to the Progressive Policy Institute.
According to the World Bank, remittances are the largest source of external finance for developing countries, exceeding the amount they receive in foreign direct investment or foreign aid every year. In 2006, the World Bank expects remittance flows to developing countries will surpass $200 billion dollars for the first time.
Despite substantial growth in international remittances, on average only 25 per cent of adults in developing countries have access to basic financial services such as a bank account. Research shows that a large number of remittances are sent on a personal cash to cash basis with family members taking extra cash to give their relatives when going on holiday. This has tended to limit the impact remittances can have on improving the lives of the poor.
By bringing poor people into the financial system, countries can give their citizens the chance to save for the future, better manage adversity and risks through insurance and pensions and buy goods and services more easily. Moreover, new business horizons can be opened up for entrepreneurs in developing countries.
The aim of the conference, the second of its kind (the first one was held in 2003) was to provide a global forum to share ideas and international experience on the best ways to improve the impact of remittances on eliminating world poverty. The main objectives were: * To discuss innovative solutions to make new technologies and existing distribution networks, such as mobile phones, post offices and retail stores, more widely available so they can provide money transfer and other financial services to low-income households. * To establish a global dialogue on how remittances can draw people into regulated financial systems and what decision-makers, the private sector, and the international community need to do to make it happen. * To provide a platform to present and disseminate the new General Principles for International Remittance Services. These new principles were prepared by an international task force led by the Bank for International Settlements and the World Bank in response to calls by the group of G7 developed countries and the international community. They are the basis for a sound plan to guide authorities in setting up efficient remittance payment systems, promoting competition, enhancing consumer protection, and establishing adequate regulation of money transfer companies. * To generate new ideas and practical solutions to maximise the developmental impact of remittances in developing countries, while exploring how government and private companies can work better together to broaden access to finance in developing countries.
The DFID contributed ã900,000 to a joint project with Vodafone to develop, pilot and launch a mobile-banking solution in Kenya through their subsidiary Safaricom. The DFID is also working with the World Bank and others to address regulatory constraints, such as competition issues and consumer protection, which is preventing greater use of mobile banking to send money.
The World Bank has also committed significant resources to work with policy makers and the private sector to promote sound policies and an investment-friendly climate for remittances and access to finance.
http://www.dawn.com/2006/11/20/ebr14.htm
By M. Ziauddin
ACCORDING to latest 12-month figures, Britain is suffering from a whopping $142 billion trade imbalance and a massive $64 billion current account deficit. The current account deficit widened in the last quarter of 2005 to 3.5 per cent of the GDP. This is the largest deficit for a long time. Britainââ¬â¢s budgetary deficit too, is not a very happy one at 3.4 per cent of the GDP.
Experts believe that in the long-term, the rising deficit could cause constraints on lower interest rates and growth, although like the US, the UK has been able to shrug off, so far, the current account deficits without many ills.
And of course and fascinatingly enough, despite these gapping holes in it British economy has experienced the longest period of uninterrupted economic growth lasting now almost 15 years.
Since 1992 economic growth has usually been relatively close to the long-run trend rate of 2.5 per cent. This increased stability has helped the long-term investment decisions even from abroad and that perhaps has taken care of the wide gaps in its international trade, current account as well as the budgetary deficits.
Of course, despite 15 years of economic growth, the government has been forced to borrow more than anticipated. The Pre-Budget Report forecast for 2005/6 is net borrowing of ã37 billion. Experts believe that this indicated the government was close to breaking its golden rule for borrowing and the chancellor might be forced to raise taxes or cut spending ,if the finances donââ¬â¢t improve.
As a per cent of the GDP public sector debt has risen from three per cent in 2001 to 3.7 per cent in 2005. However, this is significantly lower than other OECD countries such as Germany (4.2 per cent of the GDP), France (4.2 per cent of the GDP, the US (4.9 per cent of the GDP) and Japan (7.4 per cent of the GDP), according to financial year 2003.
However, countries like Pakistan which suffer from acute resource constraints and which have very little to sell abroad cannot take the route that Britain and the US economies have taken without the fear of compounding the problems. But since the last IMF programme came to an early end two years back Pakistan seems to have gone on its own. This seems to have allowed the government to stay the course on the growth front which in recent months has caused widening gaps in the trade, current account and budgetary deficits threatening to push the country back into the vicious cycle of the 1990s when the country had suffered from all kinds of deficits plus the IMF conditionalities bringing the economy to almost a standstill.
Meanwhile, the 9/11 related bonanza also seems to be tapering off and the income from the privatisation too, may not remain at the same level as in the immediate past. So, how do we fund these deficits and still continue on the growth path?
There is one window of opportunity which continues to reassure our official economic managers and that is the rising trend in remittances which have gone up from about a billion dollars in 2000 to $4.6 billion last year.
The other day, the Governor of the State Bank of Pakistan, Dr. Shamshad Akhtar who was here on a visit said that while it was not possible to fix targets for remittances she expected the inflow to go up much beyond $5 billion in the coming couple of years. She said she would push the bankers to go out in the field and mobilise remittances.
The Governor was here to attend a conference on remittances on 13th and 14th of this month, jointly organized by the UKââ¬â¢s Department for International Development (DFID) and the World Bank. The focus of the conference was on how to get the remittances quickly and cheaply and many of the speakers focused on the use of the low-cost technology of mobile telephones to achieve this.
The participants felt that one of the major challenges for policy-makers, the private sector, and the international community was to leverage the growing volume of remittance flows to provide access to financial services to millions of poor people and, thus, contribute to reduce poverty and promote economic growth.
By bringing millions of poor people into the financial system, countries can grant their citizens the opportunity to save, build their assets, and smooth their consumption. There is growing consensus that mobile-banking offers a unique opportunity to extend banking services to the poor - including the ability to send and receive remittances. There are more than twice as many people with mobile phones than have a bank account in Africa and the number is growing fast - African mobile phone subscribers grew from 7.5 million to 76.8 million from 1999 to 2004 (International Telecommunications Union 2005), and this will further increase to 250 million in the next four years, according to the Progressive Policy Institute.
According to the World Bank, remittances are the largest source of external finance for developing countries, exceeding the amount they receive in foreign direct investment or foreign aid every year. In 2006, the World Bank expects remittance flows to developing countries will surpass $200 billion dollars for the first time.
Despite substantial growth in international remittances, on average only 25 per cent of adults in developing countries have access to basic financial services such as a bank account. Research shows that a large number of remittances are sent on a personal cash to cash basis with family members taking extra cash to give their relatives when going on holiday. This has tended to limit the impact remittances can have on improving the lives of the poor.
By bringing poor people into the financial system, countries can give their citizens the chance to save for the future, better manage adversity and risks through insurance and pensions and buy goods and services more easily. Moreover, new business horizons can be opened up for entrepreneurs in developing countries.
The aim of the conference, the second of its kind (the first one was held in 2003) was to provide a global forum to share ideas and international experience on the best ways to improve the impact of remittances on eliminating world poverty. The main objectives were: * To discuss innovative solutions to make new technologies and existing distribution networks, such as mobile phones, post offices and retail stores, more widely available so they can provide money transfer and other financial services to low-income households. * To establish a global dialogue on how remittances can draw people into regulated financial systems and what decision-makers, the private sector, and the international community need to do to make it happen. * To provide a platform to present and disseminate the new General Principles for International Remittance Services. These new principles were prepared by an international task force led by the Bank for International Settlements and the World Bank in response to calls by the group of G7 developed countries and the international community. They are the basis for a sound plan to guide authorities in setting up efficient remittance payment systems, promoting competition, enhancing consumer protection, and establishing adequate regulation of money transfer companies. * To generate new ideas and practical solutions to maximise the developmental impact of remittances in developing countries, while exploring how government and private companies can work better together to broaden access to finance in developing countries.
The DFID contributed ã900,000 to a joint project with Vodafone to develop, pilot and launch a mobile-banking solution in Kenya through their subsidiary Safaricom. The DFID is also working with the World Bank and others to address regulatory constraints, such as competition issues and consumer protection, which is preventing greater use of mobile banking to send money.
The World Bank has also committed significant resources to work with policy makers and the private sector to promote sound policies and an investment-friendly climate for remittances and access to finance.
http://www.dawn.com/2006/11/20/ebr14.htm
