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Economy

Remittances Grow by 24% to $2.26b

Remittance inflows remains strong above $2b for ninth successive month in February 2021

KARACHI: The flow of workers’ remittances into Pakistan remained strong at above $2 billion for the ninth successive month in February 2021, which helped the government maintain the country’s foreign currency reserves at stable levels and strengthened its capacity to make international payments smoothly.

The country received remittances worth $2.26 billion in February, which was 24% higher than $1.82 billion in the same month of previous year.

On a month-on-month basis, the inflows remained stable during the month under review compared to January 2021, the State Bank of Pakistan (SBP) reported on Thursday.

Cumulatively, in the first eight months (July-February) of the current fiscal year, the remittances grew 24% to $18.74 billion compared to $15.10 billion in the same period of last year.

“Remittances, sent home by overseas Pakistanis, are slightly higher by $50-100 million than the expectations for February,” a leading bank’s head of remittances department told media.

“Remittances for the full fiscal year 2020-21 will be close to $28 billion,” he estimated.

Earlier in January, the central bank revised up its projection for remittances to $24-25 billion in FY21. The country had received record high remittances of $23.10 billion in the preceding fiscal year.

The strong inflows have beaten a couple-of-month-old forecast by local and global research houses including Moody’s Investors Service in which they had anticipated a notable drop in remittances during January-June 2021.

With this, the uncertain period regarding likely drop in remittances came to an end as inflows in the remaining four months (March-June) of FY21 were expected to grow further due to the upcoming fasting month of Ramazan in April and Eidul Fitr in May.

“Remittances peak in months when Ramazan and Eid fall every year,” the banker said.

The first 10-day pattern of remittances inflow in the ongoing month of April stood notably strong. “This suggests the remittances may surpass $2.40 billion in April,” he added.

The remittances have remained strong over $2 billion a month due to crushing of illegal hawala-hundi system of sending remittances to homeland from abroad amid partial suspension of international flights during the ongoing Covid-19 pandemic. The currency smugglers used to travel through the flights, he said.

Covid-19, however, still remains a big challenge for the world. It holds the potential to impact flow of remittances from developed countries to emerging economies like Pakistan, he said.

On the other hand, continued recovery from the pandemic would help reopen global economies and improve flows of remittances to Pakistan.

He said that the drop in Covid-19 cases has already extended its support in reviving international oil prices, which is good for the oil exporting countries in Middle East like Saudi Arabia and UAE where around 70% of the estimated total nine million Pakistanis expatriates live and send remittances from.

“I was surprised to note that some 25,000-30,000 people were still going every month from Pakistan to Saudi Arabia alone to work there during the pandemic,” he said, adding that the number of Pakistanis going abroad to earn their bread and butter can be increased significantly if the government rolls out a financial support program for them.

“If the central bank asks commercial banks to introduce a subsidised loan package of up to Rs500,000 for the people going aboard for job purposes…would not only reduce cost of financing to people, but would also convince more people to go abroad and help the country attract higher remittances,” he said.

“Covid has helped Pakistan come to know its actual potential of remittances receipts. We should learn lessons from this and should not allow currency smugglers to reorganise in the good days ahead,” he said.

The central bank said “policy measures undertaken by the government and SBP to encourage inflows through formal channels, limited cross border travel due to Covid-19, medical expenses and altruistic transfers to Pakistan amidst the pandemic, and orderly exchange market conditions contributed to this sustained rise in workers’ remittances.”

The country’s foreign currency reserves remains stable at 13-month high of $13 billion which are enough to finance imports for three months.

Country-wise Break-Up

Pakistanis sent 4% higher remittances at $533 million from Saudi Arabia in February compared to $513 million in the same month of last year. The non-resident Pakistanis also dispatched 4% higher remittances from UAE at $488 million in the month under review compared to $468 million in the corresponding month of the previous year.

The expatriates sent $349 million from the United Kingdom, showing a growth of 101% compared to $174 million remitted in February 2020. Meanwhile, remittances from USA rose 53% to $211 million compared to $138 million.

Remittances from other parts of the world also remained stable or improved in February.

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