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October 13, 2020

Remittances surpass target to reach at $2.3bln in Sept

Business

October 13, 2020

KARACHI: Remittances have surpassed the $2 billion target in September as lifting of lockdown together with initiatives to promote inflows through banking channels come to fruition, the central bank said on Monday.

In September, remittance inflows rose to $2.3 billion, 31.2 percent higher than the same month last year and 9 percent higher than in August, according to the State Bank of Pakistan (SBP).

“The level of remittances in September was slightly higher than SBP’s projections of $2 billion,” the SBP said in a statement.

“Efforts under the Pakistan remittances initiative and the gradual re-opening of major host destinations such as Middle East, Europe and United States contributed to the sustained increase in workers’ remittances.”

In September, workers’ remittances remained above the $2 billion for the fourth month in a row.

The remittance-sending countries had gone into lockdown in the aftermath of coronavirus pandemic with economic activities hitting the rock-bottom for four to five months. However, easing of lockdown since August is gradually bringing the situation back to normal.

Remittances rose to a record high of 31.1 percent to $7.1 billion in the first quarter of the current fiscal year of 2020/21 as people’s proclivity to use banking channels to wire funds increased during the period.

The SBP data showed that Pakistan had received $5.4 billion in the corresponding period a year earlier.

Analysts attributed a significant growth in remittances to the increased use of formal banking channels for sending money home, one-time repatriation of higher savings and remittance initiatives taken by the SBP.

The SBP’s figures showed that most of the money sent to the country came from Saudi Arabia, followed by the United Arab Emirates (UAE) and the United Kingdom (UK). Remittances from Saudi Arabia rose 33.6 percent to $2.1 billion in July-September FY2021.

Remittances from the UAE increased 7.78 percent to $1.4 billion. Pakistani diaspora working in the UK sent $985.5 million. That was compared with $574.5 million in the same period of last fiscal year.

Analysts said the persistent rise in the remittances is due to a number of reasons. The decline in the use of the unofficial hundi and hawala channels amid crackdown on illegal sources, and limited travel of overseas Pakistanis to the country on the back of coronavirus pandemic helped remittances mostly route through legal sources.

A tax amnesty announced by the government in the construction sector also encouraged Pakistani expatriates to send more money home. Moreover, remittances rise in periods of crisis as overseas Pakistanis send higher amounts when real income declines in their home country.

Remittances usually squeeze in the global economic slowdown as immigrants face wage cuts, layoffs and are compelled to send money home. However, remittances remained resilient in response to adverse shocks in the pandemic-hit countries in the emerging economies.

Analysts still believe the upward trend in the remittances may be a short phenomenon as this model doesn't look sustainable in the time when expatriates are experiencing cuts in their salaries and risk of unemployment due to the economic downturn amid the Covid-19.