Remittances- key driver of Pakistans economy

May 20, 2021 (MLN): Workers’ remittances to Pakistan hit $2.8 billion in April 2021, the highest level on record with an increase of 56 percent from the same month a year ago.

This was the 11th consecutive month of remittances exceeding $2 billion, which has become somewhat a norm now.

Cumulatively, the flow of remittances rose to an unprecedented level of $24.2 billion during July-April FY21, depicting a growth of 29 percent, compared with the same period last year. This also surpassed the full FY20 level by over $1bn, creating a new record, as per the State Bank of Pakistan (SBP).

On a sequential basis, the growth in remittances remained flat at 2% in April 2021.

This steady increase in workers’ remittances largely reflects limited cross border travel amid pandemic, growing usage of banking channel attributable to the Government and SBP’s relentless efforts to attract inflows through official channel, relatively stable exchange rate regime, altruistic transfers to Pakistan amid the pandemic, and more recently Eid-related inflows, SBP said.

The vast bulk of inflows came from Saudi Arabia whose economic recovery is gathering pace from pandemic due to vaccine rollout. Remittances from KSA rose to $6.4 billion during ten months of the current fiscal year, up by 20 percent when compared to the corresponding period last year, contributing to 26 percent of total remittances during July-April FY21. Recently, Saudi Arabia agreed, in principle, to help Pakistan by resuming the Saudi Oil Facility (SOF) on deferred payments costing up to $3 billion per annum for an extended period. Pakistan made a fresh request to revive oil supply during the visit of Prime Minister Imran Khan to the Kingdom.

In terms of value, remittance received from the United Arab Emirates (UAE) was the second-highest that reached $5.08 billion, showing a growth of 8.4% during the 10MFY21.  This was followed by the United Kingdom with inflows of $3.33 billion during the said period. It is pertinent to mention that remittances from the UK witnessed the highest growth of 68% YoY in July-April FY21.

Given a recent release by the Pakistan Bureau of Statistics (PBS), which showed a minor decline in trade deficit in April, there is a chance that Pakistan might see a current account surplus in April, albeit a minor one. More pertinently, given that the surplus for 9MFY21 stands at $959 million, the country could be heading towards a current account surplus in FY21E, said Ahmed Lakhani, Senior Analyst at JS Global Capital. 

Copyright Mettis Link News