Remittances rise 8pc in July-Feb

KARACHI: Remittances from Pakistani citizens working abroad increased 8 percent to $20.1 billion in the eight months of this fiscal year, the central bank data showed on Thursday.

The flow of remittances to the country saw an upward trend in July-February FY2022 on the back of incentives given to overseas Pakistanis for sending money home through official channels.

An amount of $5.1 billion came into Pakistan in the form of workers’ remittances from Saudi Arabia in July-February FY2022, compared with $5.0 received in the corresponding period of last fiscal year, according to the State Bank of Pakistan figures.

In contrast, Pakistani expats employed in the UAE sent home $3.8 billion in the eight months of FY2022, a decline of four percent from a year earlier. Remittances from the United Kingdom rose 10 percent to $2.8 billion. These inflows received from the United States stood at $1.9 billion in July-February FY2022, showing an increase of 18 percent over the same period last year.

“With $2.2 billion of inflows during February 2022, workers' remittances continued their strong performance and have remained above $2 billion since June 2020,” the SBP said in a statement issued on the same day.

“In terms of growth, during February 2022, remittances increased by 2 percent on month-on-month basis despite fewer working days compared to January and fell by 2.7 percent on year-on-year basis,” it added.

A fall in YoY remittances in February was attributed to lesser travel restrictions and seasonal factors.

Remittances fell marginally in January, partly reflecting seasonality, but have grown in line with expectations so far this fiscal year, the SBP noted in the monetary policy statement this week.

Remittances are the major source of foreign exchange for the country. These flows help meet financing needs of the current account deficit. It would not be good for the country’s external current account if citizens living sent fewer remittances.

The SBP sees Russia-Ukraine conflict has brought a high degree of uncertainty to the outlook for international commodity prices and global financial conditions.

Continued adverse conditions on these fronts could pose challenges to the outlook for the current account deficit and inflation expectations, it warned in the monetary policy statement.

The current account deficit rose to $2.6 billion in January, this included a sizeable contribution from imports financed through loans and supplier credit, including oil and vaccines. Since these imports were concurrently financed with offsetting inflows in the capital and financial account, they did not undermine sustainability of the current account, the SBP said.

“Looking ahead, the non-oil current account deficit is expected to decline, as import growth continues to slow with moderating demand, while exports and remittances remain resilient. The outlook for the overall current account deficit is dependent on the path of international oil prices,” it added.

Khurram Schehzad, CEO at Alpha Beta Core, said with remittances clocking in at $2.2 billion for February (down 2.7 percent YoY), the current account deficit for the same month would be slightly below $1 billion, “hopefully”.

“The real issue with respect to the external account starts from March when oil prices went up by more than 30 percent within 10 days and came down half of this growth number so far. Coal and wheat with other food prices have gone up too, massively,” Schehzad said. There was need to watch out for imports, oil subsidy (petroleum supply crisis) and dollar against rupee, he said.

“Current account deficit would be higher than $1 billion, or about $1.5 billion, if services and income deficits continue to be over $700-800 million,” he added.