RemittancesGateway.org

Pakistan: Govt seeking to securitise $4bn remittances from Gulf

Tuesday, 01 March 2011 09:54

Source:The News International
By: Aftab Maken

President Asif Ali Zardari is making desperate efforts to win support from UAE’s ruling elite for securitisation of foreign remittances of $4 billion to bridge the fiscal deficit, sources said.

Securitisation means getting loans against possible future inflows.

These efforts came after multilateral donors refused to provide support following the suspension of the International Monetary Fund (IMF) programme.

On the sidelines of his visit to Kuwait, Zardari will also discuss the option of securitising foreign remittances from Gulf states keeping in view the average transfer of foreign remittances, said an official of the finance ministry, requesting anonymity.

Finance Secretary Dr Waqar Masood confirmed to The News that securitisation of remittances was an option under consideration but it was not linked with the visit of the president to UAE.

Pakistan’s average remittances from UAE remain between $1.5 billion and $2 billion a year. Pakistan can securitise these remittances from the UAE authorities to curtail the burgeoning deficit to five percent of the GDP, said an official.

The PPP government in its early days of 2008 considered the option of securitising the foreign remittances by asking a public sector bank to see the foreign remittances trends of Pakistani expatriates living there, said Saqib Sherani, an economist and former advisor of finance ministry.

After the assessment of remittances trends front up-take of either two or three years can be raised from this option, he said.

“It is not a sane decision of the finance managers,” said an economist at a local university when asked for comments. “This is just an economic gimmick and will not produce results in the current scenario.”

Seeking a soft loan of $3 billion from Japan was at the top of the agenda during Zardri’s recent trip there, but the joint statement at the conclusion of the visit said nothing about it.

UAE authorities have assured to Islamabad that they would release outstanding $800 million of Etisalat proceeds.

The options under consideration for increasing revenues include raising special excise duty (SED) and flood surcharge to generate around Rs46 billion.

Pakistan is yet to receive the sixth and the seventh tranches of a $11.3 billion loan from the IMF, each worth about $1.7 billion.

The IMF has withheld payments because the government failed to meet performance criteria.

The standby agreement (SBA) was aimed at restoring financial stability through a tightening of fiscal and monetary policies to bring down inflation, strengthening of foreign currency reserves, and raising budgetary revenues through tax reforms.