Remittances to Pakistan have grown by around 5.5% during the first ten months of this fiscal year (Jul-Apr FY20).
On month on month basis, the remittances during April 2020 amounted to US $1.79 billion, recording a decrease of US $104.4 million or 5.5% mainly due to a slow down in the global economy owing to the coronavirus pandemic. It had received US $1.89 billion during the previous month (March 2020).
However, the remittances during April 2020 increased by US $19.8 million or 1.1% to US $1.790 billion as compared with US $1.77 billion) during the corresponding month of FY19.
In April, larger amounts of workers’ remittances ($451.4 million) were received from Saudi Arabia, followed by USA ($401.9 million), UAE ($353.8 million) and UK ($226.6 million), recording an increase of 14% for USA, whereas a decrease of 0.2%, 15.8% and 8.8% for Saudi Arabia, UAE and UK respectively as compared to March.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities said the numbers have started to show deceleration from oil-rich countries because of layoffs and cut in development spending in those countries after the oil price crash. However, given the prevalent use of informal channels, the official numbers would look reasonable for now.
Saudi Arabia and UAE account for 70 percent of remittances inflows in Pakistan. A major drop was seen from UAE due to the massive layoffs of Pakistani workers by the companies. Remittances from KSA and USA were quite stable despite the tough situation being faced by Pakistanis in terms of jobs and pay cuts.
However. Pakistanis quite stable in these countries financially sent regular and enhanced remittance which significantly offset the impact of drop in contributions by struggling overseas workers.
It should be noted that overseas Pakistanis usually send an enhanced amount of remittances in Ramadan on the account of Zakat, Fitra, Charity, and expenses related to Eid.
Osama Rizvi, an economic and geopolitical analyst said that Pakistans hould get ready for a further drop in remittances as the global economy won’t be recovering soon.
“Given the fact that KSA is one of the top countries responsible for our remittances it is instructive to note the current circumstances there. They have just increased the VAT by three times and are now embracing an austerity drive as lower oik prices and production cuts makes it difficult for them to avoid a budget deficit,” he added.
Remittances received from Malaysia, Norway, Switzerland, Australia, Canada, Japan and other countries during April 2020 amounted to $206 million.
The government has also enhanced the incentives for overseas Pakistanis, banks and exchange companies. The State Bank of Pakistan (SBP) has increased profit margins of authorized dealers in foreign exchange and microfinance banks, on bringing workers’ remittances through legal channels.
In this way, remittances from Hawala and Hundi channel are diverted to the banking channel.
First 10 Months
During the first ten months, overseas Pakistani workers have remitted $18.782 billion in July to April of FY20 against the inflows of $17.801 billion arrived during the same period in the preceding year (FY19), recording an increase of $980.6 million, according to the State Bank of Pakistan.
During the period under review, home remittances from Saudi Arabia and the US were increased by some 5% and 21.27% respectively.
According to the data, Saudi Arabia was still the largest contributor with a major share in overall remittances. $4.377 billion inflows were received from Saudi Arabia in the first ten months of this fiscal year 10MFY20. The United Arab Emirates came in second, accounting for inflows worth $3.9 billion. Remittances from the United States jumped to $3.82 billion during the 10 months of this fiscal year.
Considering the present position of remittances Pakistan may touch the mark of US $20 billion in the remaining two months of the fiscal year.