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Sunday, April 14, 2024

Remittances exceed $2 billion for 8th consecutive month

Prime Minister Imran Khan lauded the overseas Pakistanis for ‘record increase’ in remittances in 2021.

Remittances from overseas Pakistanis sustained the momentum, exceeding $2 billion for the eight-straight month. They stood at $2.3 billion in January, up 19% from a year earlier, reported the State Bank of Pakistan on Monday. However, remittances remained slightly lower from December 2020 level of $2.4 billion.

Prime Minister Imran Khan thanked the overseas Pakistanis for their continued support to help lift up the country’s economy.

Read More: Pakistan’s foreign remittances increase by 24.4% compared to same time last year

“Remittances from overseas Pakistanis were $2.27 bn in Jan, up 19% over Jan 2020 – 8th consecutive month of remittances above $2b’’, tweeted the premier.


“To date in this fiscal year, they are up 24% compared to last year,” he said and added, “this is a record for our country and I thank our overseas Pakistanis”

During July-Jan 7MFY21, workers’ remittances reached $16.5 billion cumulatively, which was a 24 percent increase over the same period last year.

“This sustained increase in workers’ remittances largely reflects a growing use of the banking channel that is attributed to continuous efforts by government and SBP to attract inflows through the official channel, limited cross border travel amid the second wave of Covid-19, and flexible exchange rate regime,” the apex bank commented.

A major chunk of the workers’ remittances was sourced from Saudi Arabia amounting to $4.5 billion (Dh16.5 billion), followed by UAE at $3.4 billion (Dh 12.5 billion), United Kingdom at $2.2 billion (Dh8.14 billion) and the United States at $1.4 billion (Dh5.1 billion).

The consistent inflows of the remittances have played a vital role in the sustainability of the current account, which has remained in surplus for the past 6 months.

According to Topline Securities, Pakistan’s remittances have surpassed Bangladesh by an average of 28%.  It is a positive development as a decade ago, Pakistan was earning 86% of what Bangladesh used to earn in remittances.

PM Khan also highlighted the performance of the industrial sector and stated that the sector is showing sustained growth.

“Large manufacturing saw another double digital growth in December 2020, which is 11.4 percent growth versus December 2019. Cumulative July to December growth now stands above eight percent,” Khan declared through social media platforms.

Remittances soar during COVID19

Nearly 10 million Pakistanis live abroad and the money that they send back serves as a catalyst for investment in the country. In 2020 alone, $23 billion USD were received by the country in the form of remittances from this diaspora community, equivalent to around 8% of Pakistan’s GDP.

Despite the ongoing pandemic, Pakistan’s remittances grew by nearly 25%. This helped in stabilizing the economy during the global crisis by creating a current account surplus. It is believed that the surge in remittances during 2020 can be attributed to the overseas Pakistani workers coming home after losing their jobs and bringing their savings with them.

Apart from that, the Pakistani diaspora exhibited strong confidence in PM’s khan latest initiatives launched for the overseas Pakistanis.

Earlier, SBP reported that the foreign exchange inflows through the Roshan Digital Accounts (RDAs) had reached $400 million within four months indicating the growing confidence of people in PM Khan’s latest initiative launched for overseas Pakistanis. The RDA’s were basically introduced to allow Non-Resident Pakistanis (NRPs) to partake in banking, payment and investment activities in Pakistan without being physically present in the country.

Read More: Can an increase in remittances boost Pakistan’s economy?

SBP has also launched Naya Pakistan Savings Certificate with the aim of boosting the country’s economy by attracting foreign investments. They are high-interest yielding sovereign investment certificates issued by the State Bank of Pakistan (SBP) for Foreign Currency Value Account holders (FCVA) and Pakistani Rupee Value Account holders (NRVA). They offer lucrative risk-free returns for the investors over different maturities and are also presenting the NRP’s with an opportunity to play their part in the development of a progressive Pakistan.

Both RDA’s and Naya Pakistan Savings Certificates are a step in the right direction by the current government as they would help Pakistan in generating sufficient financial resources to spur economic development in the country and would ensure smooth access to the financial sector in Pakistan for overseas Pakistanis.

Being The Exception

In April 2020, when the pandemic had hit almost the entire world, World Bank issued a reports saying that Low and Middle Income (LMICs) like Pakistan would be hit the hardest. “Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies,” said World Bank Group President David Malpass.

It was true for countries like India where they fell by 10%, but Pakistan and Bangladesh showed different results, with Bangladesh showing 35% increase in remittances. Even by July 2020, international policy think tanks hypothesized that the rise in remittances in Pakistan and Bangladesh was due to people transferring their savings before moving back. However, it was later reported as untrue.

A huge chunk of Pakistan’s remittances came from the gulf countries like the Kingdom of Saudia Arabia(KSA) and other gulf countries, via informal means like hundi/hawala, by the hands of Umrah and Hajj performers.

Travel restrictions in KSA and Western countries led to people using formal means hence higher remittances are recorded during the 7MFY21 in Pakistan and Bangladesh. This theory also explains why they remained low from UAE, where there were lower restrictions, hence informal practices retained.