Record remittances

It is worth noting that no country the size of Pakistan can rely only on remittances to support its economy

There was a rare bit of good news on the economic front, as monthly foreign remittances crossed $3 billion for the first time ever in April, breaking the record of $2.8 billion set a month earlier. According to the SBP, the April 2022 figure stands at $3.1 billion, an increase of 12% over April 2021 and enough to keep the country on track to beat the $30 billion remittances target for the ongoing fiscal year — we have already received $26.1 billion in the first 10 months of the year. While Saudi Arabia remains the biggest source of remittances, the figure for the current fiscal year is just 1.1% higher than last year; while the figure for the UAE, the second-biggest remittance source, actually fell by 3.6%. The increase has actually been driven by US-based Pakistanis and others in ‘non-traditional’ source countries, including the EU and Canada, which all saw year-on-year increases between 20% and 28%.

Incidentally, the increase in April was also higher than the overall increase in the fiscal year to date, which would suggest that despite all the political instability and the eventual fall of Imran Khan’s government, overseas Pakistanis continue to send money home. In fact, the PML-N and the other coalition partners may well use the April increase of 12%, as opposed to the year-to-date increase of 7.6%, to show that overseas Pakistanis actually have more faith in them than the ousted PTI government. However, some experts have noted that remittances tend to spike in Ramazan and the days before Eidul Fitr — meaning that the PML-N probably only benefitted from the calendar.

But whatever the case, we must note that despite the healthy increase in remittances, the ballooning imports figure and rising debt-servicing costs mean that the foreign exchange reserves continue to dwindle. It is also worth noting that no country the size of Pakistan can continue to rely only on remittances to support its economy — heavy reforms are needed to stimulate domestic economic activity and grow exports while keeping imports in check. Unfortunately, no Pakistani government has been able to find a way to achieve all three.

Published in The Express Tribune, May 17^th, 2022.

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