January remittances surge 19pc, rising for 8th consecutive month

KARACHI: Remittances surged 19 percent year on year to $2.3 billion in January as the government’s initiatives continued to keep the monthly foreign inflows over the two billion dollars mark, the central bank said on Monday.

“This sustained increase in workers’ remittances largely reflects growing use of banking channel that is attributed to continuous efforts by the government and SBP to attract inflows through official channel, limited cross-border travel amid the second wave of COVID-19 and flexible exchange rate regime,” the State Bank of Pakistan (SBP) said in a statement.

Remittances stood at $1.9 billion in January last year, according to the SBP. Remittances amounted to $2.4 billion in December. During July-January FY2021, Pakistan received $16.5 billion on account of foreign remittance compared with $13.3 billion in the corresponding period of last fiscal year.

Saad Hashemy, executive director at BMA Capital, said there are two predominant reasons for the surge in remittances.

“One is the government's focus on shifting remittances to official channels and the other is lower travel and flights that have led to more usage of electronic means,” said Hashemy. “There was initially concern that the surge might be short-lived as it was due to loss of jobs and movement of capital and savings but sustainability of the growth trend has proved this false so far.”

The World Bank had to revise up its forecast about remittances transfer in the world after considering the fast transition to digital means of funds transfer. The SBP expects remittances to be $24-25 billion in FY2021.Analysts expect remittances to remain well above $2.2 billion per month in FY2021 and are forecast to reach $27 billion this fiscal year.

The SBP’s data showed that most of the remittance flows sent from Saudi Arabia followed by the United Arab Emirates (UAE), the United Kingdom (UK) and the United States of America (USA.) Remittances from Saudi Arabia rose 21.7 percent to $4.5 billion in July-January FY2021.

Expatriates living in the UAE sent home $3.4 billion in seven months compared with $3.2 billion in the same period of last year.

Remittances sourced from the UK increased 51.5 percent to $2.2 billion. Remittances from the USA rose 45.8 percent to $1.4 billion.

The government and the central bank’s initiative to attract remittances through Roshan Digital Accounts (RDAs) for overseas Pakistanis have also started yielding results. Remittances from non-resident Pakistanis into RDAs have reached more than $480 million since the scheme launched in September last year.

Moreover, people are losing jobs in foreign countries due to the pandemic and bringing their money back to Pakistan permanently, resulting in an increase in remittances, according to analysts. The reduction in the cost of transfers to the country through official channels contributed to the increase in remittance flows, they said.