Remittances hit all-time monthly high of $3.1bn in April

KARACHI: Remittances from overseas Pakistanis rose to a record high of $3.1 billion in April, the central bank said on Friday, an encouraging sign for the cash-strapped country.

Workers' remittances crossed $3 billion for the first time ever, the State Bank of Pakistan said in a statement. These inflows increased 11.2 percent month-on-month and 11.9 percent on a yearly basis, it added.

As a result, total remittances in 10 months of this fiscal year rose to $26.1 billion, 7.6 percent higher than in the same period in 2020-2021. The figures suggest that Pakistani expatriates sent home more funds to support their families during the holy month of Ramazan and to celebrate the festival of Eidul Fitr.

The remittance flows are one of the largest sources of foreign income for Pakistan. They proved to be more stable than capital flows and they remained resilient during the coronavirus pandemic.

Remittances' inflows during April 2022 were mainly sourced from Saudi Arabia ($707 million), United Arab Emirates ($614 million), United Kingdom ($484 million) and the United States of America ($346 million), according to the SBP data.

"Pakistan's diaspora flows kept rising, showing confidence of the expatriates in the country's economy and the policies of the State Bank adopted to boost remittances," Dr Salman Shah, the former finance minister, told The News. “The facilities for overseas under Roshan Digital Account and the incentives to increase remittance flows through official channels are yielding, and they are likely to maintain the upward trend in the months to come,” Shah said.

The robust money transfers from Pakistani citizens working abroad come when times get harder in the country. The economy is stuck in a balance of payments crisis on the back of soaring imports and external debt repayments. The pressure on the foreign currency reserves and the currency is mounting amid the widening trade gap. The uncertainty over the resumption of the IMF bailout and the reluctance of Saudi Arabia, the United Arab Emirates and China to rescue Pakistan before the go-ahead from the IMF is intensifying the country’s balance of payments woes. The political temperature is also rising after the former Prime Minister Imran Khan warned he will march with his thousands of supporters to capital city Islamabad to demand new elections immediately.

The default risk of the country is increasing as the central bank foreign reserves dropped to $10.308 billion in the week that ended May 6, covering less than two months of imports.

The government needs external financing to meet its debt payments as the foreign loans surged to $15 billion in July-March FY2022. These loans were taken to finance the budget deficit and support the forex reserves. The IMF financing provides a short-term answer to external debt problems, so the new government will have to take unpopular decisions including raising fuel prices before starting negotiations with the IMF, according to Shah.