Remittances hit all-time monthly high in March

KARACHI: Remittances to Pakistan from its citizens employed abroad hit the highest level for a single month in March, the central bank said on Thursday, increasing 28.3 percent month-on-month, mostly due to Ramazan effect.

March remittances rose to $2.8 billion, the State Bank of Pakistan (SBP) said in a statement, adding the increase was up from 3.2 percent from a year earlier. The overseas Pakistani workers sent home $2.7 billion in the same month of previous year.

“With $2.8 billion of inflows during March 2022, workers' remittances continued their unprecedented run of remaining above $2 billion since June 2020. This is the highest ever monthly level for workers’ remittances,” the SBP said.

“Remittances inflows during March 2022 were mainly sourced from Saudi Arabia ($678 million), United Arab Emirates ($515 million), United Kingdom ($401 million) and United States of America ($300 million),” it added.

This improvement will help cushion a worsening external current account situation. The increase in remitted amount in fasting month of Ramazan is seen every year.

“Monthly increase was mainly due to Ramazan impact, which will also reflect in April numbers,” said Tahir Abbas, the research head at Arif Habib Limited.

Abbas doesn’t agree that a sharp depreciation in the currency forced the country’s diaspora to send home more funds. “Not much... currency panic was in April, numbers are from March,” he said.

The remittances continued to march upward, helped by the government incentives to the overseas Pakistanis for sending money home through official channels owing to convenience and security. Besides, the pandemic caused limited cross-border mobility. So, expats transferred more cash to their families and relatives to support them during the coronavirus crisis. However, the remittances’ growth saw a decline in January and February 2022 weighed by ease in travel restrictions and the seasonal factors.

The remittances rose 7.1 percent to $23 billion in the nine months (July-March) of this fiscal year.

The rise comes when the new government is hopeful to negotiate with the International Monetary Fund to resume a $6 billion loan programme that was in danger after the former Prime Minister Imran Khan provided energy subsidies to the masses, in violation of Pakistan’s agreement with the International Monetary Fund (IMF). The new government is facing surging inflation, depleting foreign exchange reserves, high budget and current account deficit.

Last week, the central bank hiked interest rates by 250 basis points to 12.25 percent to avert a crisis.

Strong remittance inflows are also expected to help ease the balance of payments woes. The recent oil price shock will push up the current account deficit, adding to already high gross external financing needs from an elevated debt-repayment schedule, according to Fitch Ratings.

“We now forecast a current-account deficit of around 5% of GDP (around $18.5 billion) for the fiscal year ending June 2022 (FY22), up from 4% in our February review. We expect this to moderate to around 4% in FY23, as oil prices ease,” the report said. “Pakistan faces $20 billion in external debt repayments in FY23, though this includes $7 billion in Chinese and Saudi deposits expected to be rolled over. Higher trade deficits and capital outflows have driven a sharp depreciation of the Pakistani rupee against the US dollar.”