Remittances hit four-month high
Maximum limit per person, per calendar year, to buy foreign currency, in the form of cash or outward remittances, will also be reduced from $100,000 to $50,000. photo: file
The inflows of workers' remittances sent home by overseas Pakistanis remained robust, reaching a four-month high of over $3 billion in October 2024, with significant increases from the United Arab Emirates (UAE) and United Kingdom (UK). This rise in remittances is expected to keep the current account near breakeven and help the rupee remain stable against the US dollar.
According to data from the State Bank of Pakistan (SBP), inward remittances surged by 24%, reaching $3.05 billion in October 2024 compared to $2.46 billion in the same month last year. October's inflows also increased by 7% compared to $2.86 billion in September 2024.
Cumulatively, remittances rose by 35% to $11.85 billion in the first four months of the current fiscal year (2024-25), up from $8.79 billion during the same period last year.
Finance Minister Muhammad Aurangzeb and SBP Governor Jameel Ahmad project over 12% growth in remittances, which could hit a record high of $34 billion for the full fiscal year 2024-25, up from $30.25 billion in FY24.
Speaking to The Express Tribune, AKD Securities' Director of Research, Muhammad Awais Ashraf, noted that a 31% increase in inflows from the UAE seems linked to the government's clampdown on illegal hawala-hundi networks. Meanwhile, a remarkable 30% rise in remittances from the UK is attributed to improved labour market conditions and economic recovery in the region.
Ashraf explained that more non-resident Pakistanis are now using formal channels like banks and exchange companies to send remittances home, leading to sustained growth in these inflows. This shift was further motivated by the government's collaboration with the SBP and law enforcement agencies to dismantle illegal currency markets and curb smuggling of the US dollar to neighbouring countries over the past year.
Additionally, recent incentives by the central bank for banks and exchange companies to attract higher remittances have also significantly boosted inflows, Ashraf added. Ashraf pointed out that a substantial number of Pakistanis are going abroad for work, playing a vital role in the rising remittance inflows. Approximately 2.2 million Pakistanis have taken up jobs overseas in the last 33 months, raising the total number of expatriates to 13.8 million.
He projected that remittance inflows might continue to grow, spurred by monetary easing (interest rate cuts) and recovery in global economic activity. However, inflows could face challenges if the US implements proposed taxes on outward remittances, or if oil prices fall, impacting economies in the Gulf Cooperation Council (GCC) region where most Pakistani expatriates are employed.
Regional breakdown of remittances
Remittances from the UAE surged by 31%, reaching $621 million in October 2024 compared to $474 million in the same month last year. Non-resident Pakistanis in the UK sent 30% more remittances, totalling $429 million compared to $330 million a year earlier.
Pakistani expatriates in Saudi Arabia contributed $767 million in remittances in October, up 24% from $617 million last year. Remittances from the European Union (EU) rose by 21% to $359 million from $298 million, while inflows from the United States (US). increased by 6% to $299 million from $283 million. Total remittances from other countries grew by 25%, amounting to $577 million in October compared to $461 million in the same period last year.
Rupee rebounds
Strong remittance inflows helped the rupee appreciate by Rs0.21, reaching Rs277.74 against the US dollar in the interbank market, reversing a downward trend seen over the previous four working days. The central bank reported that the rupee had depreciated by Rs0.25 over those four days, closing at Rs277.95 per dollar on Thursday due to reduced dollar supply in the forex market.
The Exchange Companies Association of Pakistan (ECAP) noted a Rs0.14 daily improvement in the local currency, which closed at Rs278.74 in the open market.
Over the past 10 months, the rupee has remained stable in the range of Rs277-279 per dollar, with expectations that this stability will continue through the fiscal year 2024-25.