Remittances fall 2.1pc to $2.71 billion in July

KARACHI: Remittances from Pakistani workers abroad slightly declined by 2.1 percent in July 2021 to $2.71 billion from nearly $2.80 billion in the same month a year earlier, the central bank reported on Tuesday.

Remittances, however inched up 0.7 percent month-on-month and exceeded $2 billion for the fourteenth straight month in July. Overseas Pakistani workers sent home $2.7 billion in June.

The drop in remittances has been blamed on extended Eid holidays.

“This marginal y/y decline was largely on account of Eid-ul-Adha, which resulted in fewer working days this July compared to last year,” the State Bank of Pakistan (SBP) said in a statement.

The central bank said workers' remittances continued their strong trend, remaining above $2.0 billion for the 14th consecutive month despite a slowdown in the first month of new fiscal year.

“This is the second-highest ever level of remittances reported in the month of July.”

Remittances hit an all-time high of $29.4 billion in FY2021.

Pakistan received $641 million in July from Saudi Arabia, which is the largest source of remittances for the country, compared with $822 million in the same month last year. These inflows saw a decline of 22 percent YoY in July, according to the SBP’s data.

Remittances sourced from the United Arab Emirates fell 1.4 percent to $531 million.

Pakistani migrants working in the United Kingdom sent home $393 million in July, largely flat when compared with the corresponding month of last fiscal year.

By contrast, remittances from the United States rose 24 percent to $312 million.

Remittances to low and middle income countries remained resilient, despite the negative impacts of the pandemic. This was the covid-19 which was itself a major factor to increase the volume of remittances in the region of South Asia.

The lockdown and the resultant loss of employment and business and along with an increase in expenditures on healthcare and other emergencies in the recipient economies of South Asia have increased families’ reliance on support from relatives living abroad.

Pakistan and Bangladesh increased the incentives for migrants as well as remittance payment processors including banks and money transfer operators (MTOs).

In Pakistan, the proactive policy measures by the government and the SBP to incentivize the use of formal channels, curtailed cross-border travel in the face of covid-19, altruistic transfers to Pakistan amid the pandemic, and orderly foreign exchange market conditions have positively contributed towards the sustained improvement in remittance inflows since last year, the SBP said.

Remittances are an important source of external financing for Pakistan. The central bank expects the flexible exchange rate system, strong remittance inflows and improvement in exports to keep the current account deficit within 2-3 percent of gross domestic product in the current fiscal year.

Remittances are likely to stay buoyant as the main factor that is switching to formal channels, incentives for banks and MTOs, will still be in place. However, analysts said one should not be over-optimistic on remittances and exports.

Analysts expect workers’ remittances to increase at a slower pace than FY2021 due to continuation of travel restrictions amid concerns over the highly transmissible covid-19 Delta variant and rising number of coronavirus cases globally.