Remittances up 21.36 percent to $1.867 billion in May

KARACHI: Workers’ remittances fell 2.13 percent to $17.463 billion during 11 months of the current fiscal year, but the last month saw almost one-fourth rise month-on-month in inflows ahead of Eid-al-Fitr. 

The State Bank of Pakistan (SBP) data showed on Friday that the country received $17.843 billion in remittances from expatriates in the July-May period of 2015/16. In May, remittances from expatriate Pakistanis amounted to $1.867 billion, up 21.36 percent over April and 3.77 percent over the same month a year earlier.   

Remittances usually receive a boost during Ramazan and ahead of Eid festival as Pakistani expatriates from Middle East, USA, UK and European countries send more money home to their families to meet Umrah and festival-related spending.

“May was a good month and so would be June due to Ramazan,” a senior banker said. “Total remittances for May and June should be between $3.5-4 billion; hence, the final figure for June-end should be around $19-19.5 billion.”

SBP forecast remittances at $19.5-20.5 billion for the current fiscal year, ending June 30. Remittances stood at $19.9 billion during the last fiscal year. Bilal Khan, an economist at Standard Chartered Bank said the inflows would remain flat. “Our expectation is that inward overseas workers’ remittances will end-FY17 almost flat on the previous year at around $19.8 billion.”

Foreign exchange firms witnessed an upsurge in remittances during the ongoing month of Ramazan.  “Remittances recorded through exchange companies saw 10-15 percent increase during the first 10 days of this Ramazan,” said Zafar Paracha, general secretary at Exchange Companies Association of Pakistan.  Remittances from Saudi Arabia, which is the main source, rose to $514 million in May compared with $440 million in April. In May 2016, the inflows were $548 million.   

Analysts painted a bleak picture for the times ahead due to unfavourable labour market conditions in the Gulf region, the pound sterling’s depreciation against the dollar and tougher regulatory controls in US. “(Remittance) inflows will stall next year unless migrant labour dynamics in oil-rich countries, which are affected by depressed oil prices, get improved,” said an analyst. 

The government is, however, upbeat on the outlook.  “The development activities under Saudi Arabia’s vision 2030, which provides a roadmap for kingdom’s development and economy for next 15 years, the FIFA world Cup 2022 in Qatar and Expo 2020 in Dubai will create more labour demand,” the government said in its ‘Pakistan Economic Survey 2016/17’ document. 

Analysts said increasing cost for sending money home is also a major hurdle for Pakistani expatriates, and believed to be negatively impacting such flows. “Yes, convenience and cost, both are the major stimulants for the sender and the beneficiary to send and receive remittances through legal sources,” a banker said. “Cost for sending money is increased and it should be brought down.” 

Earlier, the sender could have sent money home up to $100 under Pakistan Remittance Initiative (PRI) free of cost as the central bank paid rebate for these services to the banks, but now the threshold is $200.

Industry sources said SBP cleared outstanding rebate payments under PRI, owing to banks, till September 2016.  Rebate claims for October and November are expected to be cleared by the end of this week, said a source.

Analysts said remittances routed through illegal sources could be much larger than usually thought as many senders bypass banks and money transfer companies. Transfers through unofficial channels could be worth up to $20 billion, according to various estimates.

The routing of remittance funds through unregulated channels, such as Hawala and Hundi is not widely productive for the economy. It’s also creating issues for the money transfer industry in the country. 

A senior banker, however, said since the stricter regulations against anti-money laundering and terrorist financing are discouraging unorganised channels, ”we might actually see an upsurge in formal remittances.” 

Despite a slowdown in growth remittances still remain one of the largest sources of foreign exchange earnings for Pakistan.