ISLAMABAD: In January, Pakistan experienced a significant increase in remittances, with a growth of 26% totaling $2.4 billion on yearly basis. This surpasses even the highest figure recorded in January 2022, which stood at $2.2 billion.
The State Bank of Pakistan disclosed this important development on Monday by releasing the latest remittances data.
In the first seven months, the inflows of remittances increased to $15.8 billion. Remittances inflows in January 2024 mainly originated from Saudi Arabia, UAE, UK and the United States of America.
The implementation of stringent monetary and fiscal policies has reduced the demand for foreign currency as a store of value, leading to stability in the Pakistani Rupee (PKR) exchange rate, which has remained steady for almost a year (at PKR 280/USD between March 23 and February 24).
The caretaker government, in conjunction with pressure from the State Bank of Pakistan, has issued clear warnings to exchange companies, speculators, and investors.
Additionally, the consolidation of exchange companies and government incentives for increased remittances to the banking sector are contributing to the country’s economic resilience.
While the requirement for external debt repayments necessitates higher export growth, the extension of debt and positive net present value (NPV) of foreign investment have helped maintain balance in the currency markets. Despite offering a risk-free return of 20%, capital has yet to shift away from the USD.
Continued adherence to IMF reforms will be crucial in sustaining stability.
To achieve an optimal balance of stability, growth, debt reduction, and tax expansion, it is essential to keep the Current Account near balanced or within 1-2% of GDP. Though it’s a long journey, every month’s progress is significant.