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Estimates and economic analysis of informal remittances for Pakistan

Khurrum S. Mughal, Muhammad Arby (), Sakkhi Babar, Saddam Ilyas and Friedrich Schneider ()

Journal of the Asia Pacific Economy, 2023, vol. 28, issue 1, 199-215

Abstract: While inflow of remittances through informal channels are widely discussed in terms of their opportunity cost for the recipient country and likely instrument of illegal activities, the size of such inflows is indeterminate. Pakistan is on the forefront of global efforts to curb hawala transactions yet no consistent estimates are available. This study attempts to use an indirect macroeconomic approach to estimate hawala transactions from United State of America (USA), United Kingdom (UK), and Saudi Arabia (KSA) for the period 2010Q3 to 2019Q2. These three countries host around 50 percent of Pakistani emigrants and account for almost 55 percent of total remittances received in Q1FY20. Our estimates show that hawala transactions have significantly declined in Pakistan as percentage of official remittances from all three countries. This demonstrates that the enhanced monitoring, regulations and various policy measures by the Government of Pakistan have proved instrumental in reducing hawala transactions over time.

Date: 2023
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DOI: 10.1080/13547860.2021.1879350

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