Expat dollars
With contributions from exports and FDI being conventionally low, Pakistan’s major foreign exchange earning comes in the form of remittances from abroad. It is this money sent by overseas Pakistanis that has offered the successive governments something to boast about when speaking about their “ability” to pull in dollars. These remittances from abroad have, for years, been the lone support to the country’s foreign exchange reserves. Courtesy the foreign remittances, the current account balance posted a surplus of $424 million in the month of July, motivating the PM to claim that the economy was “on the right track”.
The volume of expat dollars has been on a constant rise annually over the last two decades or so — except for a fall once or twice during that period. From a meager $2.3 billion in FY2002-03, the size of foreign remittances reached $19.94 in FY2017-18 and $21.8 billion in FY2018-19. With the trend continuing, the remittances from aboard reached a record high of $23.1 billion in the previous fiscal year ending on June 30, 2020. The first month of the ongoing fiscal year i.e. July saw an all-time record high of $2,768 million for a month, only to see the figure dropping to $2,095 million in August, still higher by 24% year on year.
The SBP attributes the recent rise in the volume of expat dollars to their efforts under the Pakistan Remittances Initiative and the gradual reopening of businesses in major host countries in the Middle East and Europe, besides the US. And with expats being allowed to open bank accounts in local and foreign currencies in Pakistan through mobile and internet banking, officials are expecting the remittances to reach $24-25 billion in FY-2020-21. To the contrary, independent experts see temporary factors related to the coronavirus environment behind the record rise in remittances. Fitch Ratings too anticipates a 12% drop in remittances to five Asian nations, including Pakistan, in the second half of 2020. The government needs to be prepared.
Published in The Express Tribune, September 17th, 2020.
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