Remittances Drop By 18% in May Due To COVID-19

Remittances sent by overseas Pakistanis recorded a double-digit decline of 18 percent or $429 million during May 2020 as compared to the same month of last year.

According to State Bank of Pakistan (SBP), overseas workers’ remittances stood at $1.872.8 billion in May whereas, the inflows of remittances stood at $2.3 billion in May 2019—the highest value recorded in a single month.

During the pandemic, job losses of overseas workers and the closure of international borders are the main factors affecting remittances. Overseas workers not only have left their jobs but they are looking to come back to Pakistan.

A major contribution to workers’ remittances during May 2020 came from Saudi Arabia ($436.2 million), USA ($428.3 million), UAE ($323.4 million) and UK ($284.8 million) recording an increase of 25.7 percent and 6.6 percent for UK and USA respectively and a decrease of 3.4 percent and 8.6 percent for Saudi Arabia and UAE respectively as compared to April 2020.

Remittances Surged over $20 Billion in July-May

Expatriate remittances surged to $20.654 billion during July – May FY20, up by 2.7 percent or $551.5 million over July – May FY19, which stood at $20.103 billion.

The remittances in the current month are likely to decline due to the global economic slowdown, however, the value of remittances may cross $21 billion, which will be an all-time high.

In order to combat the adverse impact of COVID-19, the government has introduced various incentives for the remitters and the service providers including banks and exchange companies. In this way, the remittances sent through Hundi and Hawala could be attracted through banking channels.

The government, in this financial bill, has proposed an allocation of Rs. 25 billion for promoting inflows of remittances through banking channels. It also proposed to abolish taxes between the government for transferring of funds under the head of remittances between banks and other agencies.

The contribution of remittances is instrumental in maintaining the current account of the country. The decline in remittances may also affect the situation of the current account in the coming months.