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Tax incentives expected to keep remittances high in 2021

The News, Pakistan, 16 May 2021 - Pakistan’s tax incentives may continue to keep the level of remittances high this year, but it is not clear how long these measures would accelerate their growth rate, the World Bank said.

Pakistan, which saw the highest surge of flows last year, had introduced new remittance tax incentives in 2019 and 2020. Remittances rose by over 17 percent to a record high of $26.1 billion, according to a World Bank’s latest migration and development brief. Remittances from Saudi Arabia increased by over 46 percent, from European Union countries by 25 percent, and from the United Arab Emirates by 19 percent, it said.

The State Bank of Pakistan, ministry of overseas Pakistanis and ministry of finance launched a joint initiative called Pakistan Remittance Initiative to provide for an ownership structure in Pakistan for remittance facilitation. The government also introduced Roshan digital accounts targeted to attract foreign currency deposits from overseas Pakistanis. However, last year the deployment of workers to the Gulf Cooperation Council (GCC) countries, Malaysia, and Hong Kong SAR and China declined by 64 percent from Pakistan. In Pakistan, the number of migrant workers dropped from 625,000 in 2019 to 225,000 in 2020, largely due to a rise in returning migrant workers from the GCC countries.

Pakistan was among top-10 recipients among low- and middle-income countries. The country received $26 billion last year compared to India ($83bln), China ($60bln), Mexico ($43bln), Philippines ($35bln), Egypt ($30bln), Bangladesh ($22bln), Nigeria ($17bln), Vietnam ($17bln) and Ukraine ($15bln).

In the region, Pakistan has the second greatest reliance on remittances at 9.9 percent of GDP after Nepal 23.5 percent. The country is the second biggest recipient in South Asia after India.



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