Remittances hit record high at $18b

KARACHI:

Pakistan has received record high workers’ remittances of $18 billion from the expatriates in first seven months (July-January) of current fiscal year 2021-22, however, the inflows shrank to 17-month low in January 2022.

Remittances rose 9% to $17.95 billion during July-January of fiscal year 2021-22 compared to $16.46 billion in the same period of 2020-21, the State Bank of Pakistan (SBP) reported on Friday.

The inflows dropped 15% month-on-month to $2.14 billion in January 2022. They had amounted to $2.52 billion in the previous month of December 2021. They slowed down 5% in January compared to $2.26 billion in the same month of last year.

“At $2.14 billion in January 2022, remittances moderated due to seasonality but remained above $2 billion threshold for the 20th straight month,” the central bank said on its official Twitter handle.

“Remittances declined partly reflecting the easing of travel restrictions,” it added.

Remittances decreased in the range of 6-20% from around the world including Saudi Arabia, the United Arab Emirates, the United Kingdom, the United States and Europe, the data suggested.

“The return of normalcy to global travel compared to a complete halt during the peak of Covid-19 has allowed non-resident Pakistanis (NRPs) to physically bring remittances along with them while travelling to the home country,” said Pak-Kuwait Investment Company Head of Research Samiullah Tariq while talking to The Express Tribune.

“Accordingly, the flow of remittances through banking channels decreased in January.”

He dismissed the fear that remittances would slip below the threshold of $2 billion a month in future. Rather, the inflows may improve after the government, central bank and Federal Board of Revenue (FBR) took measures to improve the flow of remittances through official channels.

He pointed out that the FBR had installed points of sales (POS) at domestic airports, therefore “people travelling outside of the country now declare the amounts they carry through the POS”.

Secondly, the tax collection authority has also deployed POS at currency exchange companies. Now, buying and selling of foreign currencies by currency dealers are also recorded live.

Thirdly, the central bank has offered an incentive of Re1 per dollar to the exchange companies if they surrender 100% of workers’ remittances in the inter-bank market.

“All such measures will not let the remittances drop below $2 billion a month, and improvement in inflows can be expected,” he said.

Overall inflows of workers’ remittances may be recorded at around $30 billion in the current fiscal year, he said.

The country received remittances worth $29.37 billion in the previous fiscal year 2020-21. They were 27% higher compared to $23.13 billion in the prior fiscal year 2019-20, according to the central bank.

Remittances started improving after global travel came to a standstill during the peak of Covid-19. That development also disrupted the network of illegal Hawala/ Hundi operators, who used to offer a better price to the remittance senders compared to the one offered by the official channels like banks.

Accordingly, the remittance inflows started improving from June 2020 and came in at a historic high of $2.78 billion in September 2021.

They were recorded at over $2.5 billion a month in 11 out of the past 20 months, according to the data.

Remittances are the largest source of foreign income for the country, followed by export earnings. These are mostly utilised to pay import bill and repay foreign debt.

 

Country-wise receipts

In the first seven months of FY22, the remittance inflows increased 2% from Saudi Arabia to $4.57 billion compared to $4.5 billion in the same period of previous year.

The inflows increased 13% from the United Kingdom to $2.47 billion in the seven months under review compared to $2.18 billion in the corresponding period of previous year.

Remittances from the US surged 21% to $1.7 billion in the first seven months of FY22 compared to $1.4 billion in July-January 2020-21.

The inflows dropped 2% to $3.38 billion from the United Arab Emirates compared to $3.44 billion in the corresponding period of previous year.

They increased 9% to $2.06 billion from other GCC countries (Bahrain, Oman, Kuwait and Qatar) compared to $1.88 billion in the same period of FY21.

The inflows rose 33% to $1.99 billion from the European Union during July 2021 to January 2022 against $1.45 billion in the same period of previous fiscal year.

They rose 15% to $1.78 billion from other global destinations in the seven-month period under review compared to $1.54 billion in the same period of last year.