ARE we squandering the increasing home remittances of overseas Pakistanis which will exceed $5 billion in the financial year ending June 30.

This issue has arisen as in the first 10 months of this financial year total remittances of $4.450 billion have been received, while large trade deficits and balance of payments deficits plague the economy. The average monthly remittance stands at $445 million.

This issue has also become relevant to the decision to raise foreign exchange reserve of the country to $15 billion. Building that reserve is easy while it is nearly $13.8 billion. In fact this target could have been achieved last June when the reserve stood at $14.59 billion, but it declined due rising trade and current deficits.

Now when a reserve of $15 billion is being sought, the deficit in balance of trade for the first 10 months of the year is $11 billion, while the current account deficit for the first nine months is $4 billion after absorbing home remittances and the foreign investment of $6 billion.

Building larger reserve by converting the rupee reserves of the government is rather easy. In fact the reserve was built up to the current level from billion dollars bought by the State Bank of Pakistan from open market and partially through inter-bank deals. But now it has been decided to raise additional reserve only through inter-bank deals.

So the real solution to the problem with the scary trade deficit is more of exports than of imports and not to delight in the apparent imported affluence. We are now having more of trading and less of manufacturing and expansion of the service sector. Ample proof of this lies in the decline in import of machinery for textiles which will have its impact on the exports later. And if the reserve is to be raised, it should be raised to 20 to 25 billion dollars.

The present reserve is a tiny fraction of the Chinese foreign exchange reserves of over $1,000 billion and very small as compared to India’s reserve of about $190 billion. But the reserve has to be raised in a proper manner and not through artificial mechanisms.

We need to make not only a larger volume of exports but far more of the value-added. We have to export our skills if not our brain power and not far more of our sweat for which we get a paltry price and have to acquire alluring brand names and make them truly popular.

Similarly we have to export more skilled labour to earn far more per head and not the unskilled manpower which vanishes in foreign countries after expiry of work visa.

Even those who are skilled in domestic chores earn a great deal abroad as do the Pilipino and send home large sums.

But we have a dearth of skilled labour for our own industries and particularly new skills. Workers skilled in domestic chores are also getting fewer in Pakistan so the per capita income of our overseas workers is small as compared to those of people from Philippines.

Still our larger earnings of overseas workers come from the US which average $1.2 billion a year followed by earnings of workers from Saudi Arabia and the UAE.

A tragic feature of this operation is that a large number of workers are duped by agents. A number of workers have died of suffocation in the process of trying to be smuggled out through ships or other contraptions. Official efforts to check such abuses have not been successful because of the desperate efforts of Pakistanis to seek employment abroad by any means.

And yet the overseas remittances of $4.450 billion in the first 10 months of this year exceed the amount sent last year in the same period by $820 billion or 22.6 per cent. The remittances from the US have lead again with $1.176 billion. The year may end with total remittance of $5.5 billion. For the first time it has crossed the $5 billion limit.

The remittances had gone under a billion dollars before 9/11. While the hundi system was being used to send money home, but after 9/11 sending money through banking channel began picking up and $2.389 billion was sent in 2001 and 2002. Remittance rose steadily to reach $4.326 billion in the following year.

There has been criticism that large remittances have not been put to the best use in the country. Last year at the Pakistan Development Forum of the donors, there was a charge that a great deal of remittances was used for speculation in share market and in the real estate. But the fact remains that the money does not belong to the country or the government. It belongs to those who earn them and send them home and they are free to use it the way they choose.

Of course some of the tax-evaded money in the country is sent through the hundi system and brought back as clean money and used the way their senders like. The Chairman of the Central Board of Revenue, Mr Abdullah Yusuf, wanted to lay hands on such money but the prime minister did not approve that lest that dries up the remittances which are flowing in plenty through the banking channel.

Getting tax-evaded money sent out through the still operational hundi and getting it back home through banks is a sure way to clean up black money.

As long as the government does not have the means to check the outflow of money from the country, it does not want to interfere with the inflow in such abundance more so when the balance of trade and current account deficits and the balance of trade deficits are too large and the government is underestimating its impact despite the warnings of the World Bank.

Meanwhile, the rupee is largely steady with marginal attrition. The government has left the rupee afloat and sensitive to the market mechanism. The State Bank intervenes in the market to control volatility of theexchange rate.

The government will soon claim that for the first time the foreign exchange reserve has gone up to $15 billion while the economy demands that the reserve is raised to $15 to $25 billion in view of the very large trade and balance of payments deficits.

Meanwhile, a memorandum of understanding has been signed between Pakistan and South Korea to employ Pakistani workers there. An agreement has been signed with Malaysia too to employ Pakistanis, but some hitches remain to be removed. Working in South Korea can provide good training to Pakistani workers and more of them should be sent there.

But if such attempts have to be a success, we have to provide for large training facilities and create a large pool of workers with technical qualifications both to export them as well as meet the needs of the domestic industry.

Our food import is now costing $2.3 billion and the food import is likely to rise further to beat inflation. Milk costs far more now and so does palm oil. The price of crude oil is expected to rise and the oil bill next year will consume $8.8 billion. We have to earn more to meet such diverse demands of the country.