Remittances surge to record high of $31.2bn in FY2022

KARACHI: Remittances sent by overseas Pakistani workers, a major source of foreign exchange, rose to an all-time high in the last fiscal year ended on June 30, data issued by the central bank showed on Monday, an encouraging sign for the cash-strapped country.

Pakistan received $31.2 billion in remittances from overseas in July-June FY2022, a 6.1 percent increase from $29.4 billion in the previous year. Remittances increased 18.4 percent month-on-month to $2.76 billion in June. These inflows saw 1.7 percent year-on-year growth in June.

The government had set a remittances target of $31.3 billion for FY2022. The State Bank of Pakistan predicted that the remittance flows would increase to $30.5-$32.5 billion in the last fiscal year.

The increasing use of formal channels for sending money home, and the introduction of digital apps for transferring funds due to limited air travel amid the pandemic in the later part of the FY2022 helped increase remittance inflows. The government’s digitization initiatives and the incentives being provided to non-resident Pakistanis under Roshan Digital Account and Sohni Dharti remittance programme also contributed to the increase in remittances. However, the June remittances data was seen as a reflection of seasonal factors. The overseas Pakistanis transfer more cash to the homeland for buying sacrificial animals at the religious festival of Edul Azha.

Analysts said the seasonal factors could support the remittances in the coming month. “It’s likely the July number will be high too because of Eid. Also, the full-year year number for FY2022 has shown a healthy sustainable growth of 6 percent,” said Saad Hashemy, the executive director at BMA Capital Management.

The SBP’s figures showed that most of the money sent to Pakistan during FY2022 came from Saudi Arabia ($7.74 billion), followed by the United Arab Emirates ($5.84 billion), United Kingdom ($4.48 billion), and the United States of America ($3.08 billion).

Though remittances from Saudi Arabia remained flat, inflows from the UAE fell 5 percent YoY in 12 months. Government in its annual plan for FY2023 expects oil prices led resource generation in the Gulf region to lead to more projects and possible jobs for Pakistani labour force. Further efforts are required to contain this trend in the future, particularly in the Gulf countries, it said.

The government foresees remittances to rise to $32.5 billion this fiscal year. Robust remittance flows are a positive development for the cash-strapped government as forex reserves held by the SBP dropped by $99 million to $9.71 billion during the week ending July 7.

Last week, the country managed to reach a staff-level agreement with the International Monetary Fund on policies to complete the seventh and eighth reviews of the Extended Fund Facility.

If it is approved by the IMF board, it will provide $1.17 billion to the country soon, maybe next month. However, the government will still need to arrange billions of dollars of external funding to pay for imports and service its foreign debt in FY2023.