Impact of Foreign Remittances on Economic Growth and Poverty Reduction

INTRODUCTION: Remittances typically refer to transfers of money by foreign workers to their home countries. Remittances are not a new phenomenon in the world, being a normal associated to migration which has always been a part of human history. Remittances are playing an important role in the economies of many developing and low income countries. Pakistan is a labour abundant country; hence, as neoclassical theory shows, if workers are unable to find jobs and/or wages to satisfy their needs, they will look elsewhere. Pakistan’s history provides us with a new trend of emigration nearly each decade. Remittance is an important source of foreign exchange earnings for Pakistan since 1970. During the past four decade Pakistan received significant amount of remittances, however, fluctuation were also observed in the inflow of remittances. Inflow of remittances affects economic growth positively by reducing current account deficit, improving the balance of payment position and reducing dependence o n external borrowing (Iqbal and Sttar, 2005). Pakistan like other developing countries in the world is known for its high migration and workers’ remittance. It is argued that this high migration is the result of poor economic conditions of the country because the economy is facing so many problems like unemployment, illiteracy, poverty, inflation, and terrorism etc. The people of Pakistan are migrating to foreign countries in search of job and to change their living standards. It is also argued that due to the high level of unemployment individuals are going abroad to get the employment and livelihood for their family and this unemployment is creating the problem of brain drain. The effect of remittances is not only multidimensional but in ... ...A.(2012), â€Å"Worker’s Remittances and Economic Growth in South Asia†,MPRA Paper 39001, University Library of Munich, Germany. Katsushi, S. I., Raghav, G.,Abdilahi, A., and Nidhi Kaicker,(2011), "Remittances, Growth and Poverty: New Evidence from Asian Countries," Discussion Paper Series DP2011-30, Research Institute for Economics & Business Administration, Kobe University. Levine, R. (1997), â€Å"Financial Development and Economic Growth: Views and Agenda† Journal of Economic Literature, 35(2), 688–72. Qayyum,A., Javid,M., and Arif,U.(2008), â€Å"Impact of Remittances on Economic Growth and Poverty: Evidence from Pakistan†,MPRA Paper 22941, University Library of Munich, Germany. Siddiqi,R., and Kemal,A. R.,(2006,â€Å"Remittances, Trade Liberalisation, and Poverty in Pakistan: The Role of Excluded Variables in Poverty Change Analysis,"PIDE-Working Papers 2006:1.