Remittances as Development Strategy: Stepping Stones or Slippery Slope?

Abstract

Pakistan is one of the world's top 10 remittance receiving countries. This paper examines the potential for the use of remittances as a development strategy. Remittances to Pakistan do seem to promote growth and reduce economic inequality and poverty. However, they also cause the Dutch disease, are inflationary, and tend to be pro-cyclical. The paper describes the challenges in employing remittances as the cornerstone of the country's development model, particularly the loss in competitiveness, volatility and the development of a dependency mindset that high remittance inflows can foster. In the end, some steps are suggested that are needed to be taken in this regard.

Remittances and Energy Consumption: Evidence from Morocco

“…Many recent empirical studies have shed light on the positive and negative impacts of remittances on macroeconomic and social variables. Macro and micro level empirical studies (country case studies using household surveys), supporting the optimistic view, reveal that remittances reduce income inequality, (Mughal, ), poverty (Jimenez‐Soto and Brown, ), infant mortality (Zhunio et al., ), child labour (Ebeke, ), malnutrition (Lu, ), and output volatility (Chama et al., ). Additionally, they promote economic growth (Cooray, ), financial sector development (Aggarwal, et al., ), and capital accumulation (Senbeta, ); increase the propensity to save (Ziesemer, ), aggregate labour supply (Posso, ), domestic investment (Blouchoutzi and Nikas, ), tax revenues (Abdih et al., ), and life expectancy (Zhunio et al., ); improve primary and secondary school attendance (Zhunio et al., ); and maintain macroeconomic stability (Spatafora, ).…”

Labour effects of foreign and domestic remittances – evidence from Pakistan

“…Even for a large and populous developing country such as Pakistan, the amount of transfers from migrants abroad constitutes more than all the private capital taken together (Mughal 2012;Anwar and Mughal 2012). These remittance flows to Pakistan are considered relatively stable (Mughal and Makhlouf 2011) and have helped alleviate poverty and decreased inter-household economic disparity .…”

What Drives Bilateral Remittances to Pakistan? A Gravity Model Approach

“…Given Pakistan's current economic challenges in the face of the ongoing terrorism campaign, migrant's remittances are serving as the country's economic lifeline (Mughal, 2013), and their development potential is therefore of great importance. This study examines key aspects influencing remittances, employing a gravity model approach.…”