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  • Title: Impact of workers' remittances from the Middle East on Pakistan's economy: some selected issues.
    Author: Amjad R.
    Journal: Pak Dev Rev; 1986; 25(4):757-85. PubMed ID: 12341748.
    Abstract:
    An attempt is made to clarify concepts, identify issues, and point out lacks in data relating to the impact of workers' remittances from the Middle East on the economy of Pakistan. As Pakistan is among the few countries which include workers' remittances separately in their gross national income estimates, the starting point of the discussion is the basic national income accounting identities. The important distinction in the identities outlined is between national and domestic savings and the financing of investment. Attention is directed in some detail to the period after 1976-77 when workers' remittances from Middle East countries began to have a significant impact on the domestic economy. Tables 1-7 show both the impact of remittances in terms of balance-of-payments support and the behavior of the overall economy and its major sectors during this period. These main features are summarized: a dramatic 6-fold increase in remittances from the Middle East occurred, from US $434 million in1976-77 to US $2344 million in 1982-83, followed by a decline and then a slight increase between 1984-85 and 1985-86; as a percentage of gross domestic product (GDP), workers' remittances from the Middle East increased from 3.16% in 1976-77 to a peak of 9.39% in 1982-83, followed by a decline; at its peak in 1982-83, remittances from the Middle East contributed as much as 75% to the overall balance of trade and financed 35% of the merchandise imports and non-factor services; despite the substantial increase in the level of imports made possible by remittances, there was no significant change in the level of investment as a percentage of gross national product (GNP) during this period; gross domestic savings declined sharply during the 1977-78 to 1985-86 period as compared with those in the earlier periods, but the level of gross national savings increased significantly and was double the domestic saving rate during this period; and the decline in the capital output ratio after 1976-77 was so steep, from 3.57 between 1970-71 and 1975-76 to 2.5 between 1976-77 and 1985-86, that it may cast doubt on the estimates of either investment or of output growth in the last period. The contribution of remittances to the balance of payment and gross national saving emerges from the analysis, but what has not been investigated specifically is its impact on sectoral growth rate of output and investment. Within the context of extreme data constraints, an effort is made to relate the macro with the micro studies to obtain some sense of the issues involved. The inclusion of workers' remittances in national income account poses some problems in terms of interpretation of the conventional national income accounting identies used. Finally, the use of remittances tend to suggest that they may not have been used as wastefully as the general impression suggests.
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