KARACHI: Overseas workers’ remittances surged 26.9 percent in first five months of FY2021, which the central bank attributed to an increased use of formal channels, decreased international travelling, and recovering economic activities, latest numbers showed on Friday.
State Bank of Pakistan (SBP) data presented that remittances totaled $11.77 billion in July-November FY2021, compared with $9.27 billion in the same period last fiscal year.
On average, workers’ remittances have been about half a billion ($499 million) higher in each month of FY2021, compared with the same period last year.
The remittal inflows maintained their strong momentum in November, remaining above $2 billion for a record sixth consecutive month. Remittances rose to $2.34 billion in November, 2.4 percent higher than in October and 28.4 percent higher than last November.
“Continued government and SBP efforts to formalise remittances under the Pakistan Remittances Initiative (PRI), rising use of digital channels amid limited cross-border travel, orderly exchange market conditions, and some improvement in global economic activity are some of the important factors behind the sustained improvement in workers’ remittances,” the SBP said in a statement issued on the same day.
“Remittance inflows during the first five months of FY21 have mainly been sourced from Saudi Arabia ($3.3 billion), United Arab Emirates ($2.4 billion), United Kingdom ($1.6 billion) and United States ($1.0 billion),” it added.
Remittances from the other GCC (Gulf Cooperation Council) countries rose 8.5 percent to $1.338 billion in July-November FY2021, according to the SBP’s figures. Remittances from the European Union Countries increased 37.3 percent to $1.024 billion.
The SBP projects remittances to remain flat, totaling $22-23 billion in the current fiscal year. Remittances stood at $23.1 billion in FY2020. The government has set the remittances target $21.5 billion for FY2021. The World Bank in a report published last month forecasted that remittance flows to Pakistan would grow at about 9 percent in 2020, reaching about $24 billion.
The SBP in an annual report on the state of economy for FY2020 stated that the higher growth in remittances was in contrast to projections that global remittance flows to developing countries would weaken sharply following the COVID-19 pandemic. Remittances to Pakistan in particular were expected to be hit hard, given the presence of a large number of low-skilled workers in the GCC, specifically Saudi Arabia (KSA) and the UAE, the report said. As the GCC countries were passing through the dual crises of falling oil prices and a slowdown in economic activity amid pandemic-related lockdowns, remittance flows from these regions were expected to be adversely affected, it added.
Despite partial resumption in international flights, cross-border movement remained restrictive, which points towards increased use of official channels for sending remittances.
This, interestingly, was happening at a time when a large number of migrant workers were being laid off and were returning to Pakistan. At this point, the government started developing a reintegration mechanism for returning migrants in the domestic labour market, the report noted.