Remittances up 9.7pc to $12.9bln in July-Nov

KARACHI: Remittances from Pakistani workers employed abroad rose 9.7 percent to $12.9 billion in the five months of this fiscal year, the central bank data said on Monday.

The country received $2.4 billion in November, a 0.6 percent uptick year-on-year, but fell 6.6 percent compared with the previous month.

Remittances finance the large part of the country’s trade deficit, contribute to forex reserves accumulation and reduce the government’s external financing needs.

The trade gap widened 133 percent to $4.9 billion in November. The State Bank of Pakistan (SBP) said workers' remittances continued their strong streak of remaining above $2 billion since June 2020.

“Proactive policy measures by the government and SBP to incentivize the use of formal channels and altruistic transfers to Pakistan amid the pandemic have contributed towards the sustained inflows of remittances since last year,” the central bank said in a statement.

Remittance inflows during the first five months of FY2022 have mainly originated from Saudi Arabia ($3.27 billion), UAE ($2.45 billion), UK ($1.76 billion), and USA ($1.30 billion).

The shift of flows to formal channels, especially through digital ones, the rise in savings rates of the overseas Pakistanis living in the advanced countries and higher need for support in home countries helped increase the remittance flows.

The altruistic transfers to Pakistan during the pandemic and the limited travel of expats to Pakistan because of the Covid-19 had also resulted in more funds transfers through legal channels and supported the rise in the remittances.

Cross-currency exchange rate movements increased remittances in US dollar terms, according to the SBP’s annual report on the State of Economy for FY2020/21.

“In addition, the US Dollar’s depreciation against multiple advanced economy currencies during FY21 contributed to an increase in remittances to Pakistan in USD terms,” it said. “For instance, if the Dollar depreciates against the currency in which a migrant is remitting funds (such as Euros, for a migrant in Germany), a higher amount of Dollar remittances would be recorded, even if the migrant were to remit the same amount of funds in the host country’s currency (Euros, in this case).”

The SBP sees remittances to remain upbeat and rise to $30.5-32.5 billion in FY2022. The recovery in the global economy, pickup in international demand and a range of incentives announced by the government to lower the domestic cost of production, would likely bolster the export performance, it believes.