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September 15, 2020

Remittances surge 31pc to $4.9bln in July-Aug

Business

September 15, 2020

KARACHI: Remittances to Pakistan climbed 31 percent year-on-year to $4.9 billion in the first two months of the current fiscal year of 2020/21 as incentives amid recovery from lockdown encouraged foreign inflows, the central bank said on Monday.

“Efforts under the Pakistan remittances initiative (PRI) and the gradual re-opening of businesses in major host countries such as the Middle East, Europe and the United States contributed to this increase,” the State Bank of Pakistan (SBP) said in a statement.

In August, workers’ remittances remained above $2 billion for the third month in a row. “They (remittances) reached $2.095 billion (in August), which is 24.4 percent higher than during the same month last year and largely in line with the SBP’s projections,” said the SBP.

Over the last three months, remittances reached an unprecedented level of $7.3 billion, 37.2 percent higher than the same period last year, according to the SBP. Analysts said the strong growth in remittances have helped the country build foreign exchange reserves. This will also support the balance of payments in coming months, they said.

“The PRI is bringing fruits as monthly remittances numbers are now consistently coming out to be higher than historical periods,” said Fizan Ahmed, head of research at BMA Capital. “Monthly remittances during FY2020 roughly averaged at $1.9 billion per month. The monthly average for FY21 is likely to be higher. This is a big positive for our external account.”

However, international research firms, financial institutions and rating agencies expect remittances to South Asia including Pakistan to face a setback this year, driven by the global economic slowdown amid the COVID-19 outbreak and falling oil prices.

Global rating agency Fitch Ratings anticipated a 12 percent fall in remittances in the region compared with 20 percent forecasted by the World Bank, in the second half of the year. “Declining remittances in economies that are dependent on them may affect sovereign ratings through pressures on external finances and economic growth,” Fitch said in a report.

The SBP’s data showed that Saudi Arabia remained the top remittance sending country for Pakistan in July-August, followed by the United Arab Emirates and the United Kingdom.

Remittances from Saudi Arabia rose 35.9 percent to $1.4 billion in July-August FY2021. Remittances from the UAE increased 5.8 to $947.5 million. Pakistani diaspora employed in the UK sent home $696.2 million. That compared with $397.58 million in the same period of last fiscal year.

The pandemic hasn’t disturbed flow of money transfer to Pakistan. The top three originating countries for remittances in August were Saudi Arabia ($0.6 billion), UAE ($0.4 billion) and UK ($0.3 billion).

On a month-on-month basis, remittances were 24.3 percent lower in August than the record level of remittances of $2.768 billion posted in July, mainly reflecting the usual seasonal decline in the post Eid-al-Azha period.

Remittances used to lend a big support to the fragile external account position of Pakistan that is highly dependent on foreign debts. The current account recorded a $424 million surplus in July as against a deficit of $613 million in the same month last year.