Contrary to the forecast by global think tanks, Pakistan has received the highest-ever monthly remittance of $2.7 billion in the first month (July) of the financial year 2020-21.
According to the State Bank of Pakistan, remittances increased by 36.5 percent over July 2019 year-on-year and 12.2 percent over June 2020. The growth rate in remittances compared to the same month in the previous year is around twice as high as the trend which usually shows a drop in remittances subsequent to the month of Eid-ul-Adha.
The growth in inflows is surprising and extremely valuable to the economy at a time when export income is going down due to the prevailing situation. Moody’s predicted the lowest remittances inflows in Pakistan in its recent report while the Asian Development Bank forecasted a double-digit slump of over 26% in remittances this year.
In July, handsome amounts were received from Saudi Arabia ($821.6 million), UAE ($538.2 million), UK ($393.9 million) and USA ($250.6 million) despite the unemployment reported in these countries which also affected the income of the expats supporting their relatives living in different cities of Pakistan.
The Prime Minister also shared the remittance data on his twitter account, citing it as good news for Pakistan’s economy.
More good news for Pak economy. Remittances from overseas Pakistanis reached $2,768 mn in July 2020, highest ever amount in one month in the history of Pakistan. This is 12.2% increase over June 2020 and 36.5% increase over July 2019.
— Imran Khan (@ImranKhanPTI) August 17, 2020
It is pertinent to mention here that the remittance inflows witnessed consistent growth in the last two financial years as Pakistan received an amount of $23.1 billion in FY20 and $21.7 billion in FY19, making new records every year.
Factors Supporting Growth in Remittances Inflows
Several factors have likely supported the growth in remittances to date, including orderly exchange rate conditions and policy steps taken by the State Bank and the Federal Government under the Pakistan Remittance Initiative.
These steps include reducing the threshold for eligible transactions from USD 200 to USD 100 under the Reimbursement of Telegraphic Transfer (TT) Charges Scheme, an increased push towards adoption of digital channels, and targeted marketing campaigns to promote formal channels for sending remittances.
To improve data quality and better capture the source country of the remitter, the compilation methodology for ‘country-wise’ workers’ remittances has been strengthened from this month. Therefore, country-by-country trends will be available on a consistent basis from August 2020 onwards. Importantly, the new data collection method does not affect the reporting of the level of remittances arriving in Pakistan.
The revised country shares under the improved data do not necessarily imply that remittances from one country have increased over another. Instead, they demonstrate that the source country of remittances is being recorded more accurately now.
Experts believe that one of the factors that gave impetus to remittances inflows is the increasing use of banking channels by expatriate Pakistanis who previously used other undocumented channels or sent remittances by hands to their families.
As international flight operations are suspended across the world, they have no choice but to use the legal banking channels which reflects the growth in remittances of the country. According to an estimate, remittances of nearly $10 billion landed in Pakistan from undocumented, Hawala, and Hundi channels which deprive of the country from its economic benefit.
During the situation of lockdown in tandem with COVID-19, a significant section of expatriate Pakistan availed of banking services with incentives and they are likely to use these services in the long-run, experts said.