Remittances to developing countries fell for second consecutive year in 2016

Pakistan is one of those countries around the world who rely heavily on the inward remittances. Pakistan has the ninth largest country by available human workforce; the total number of labor force available to Pakistan is 57.2 million. Out of which, Pakistan’s total overseas population, according to the Human Resource Development Yearbook 2013-14 is 8,803,226; 1.9 million are in KSA, 1.2 million in UAE, 1.51 million in UK, 0.9 million in USA, 0.1 million in South Africa and 64,277 in the Oceania(Aus and NZ). According to the UN Department of Economic and Social Affairs, Pakistan has the 6th largest Diaspora in the world. In 2014-15, overseas Pakistanis sent remittances amounting to ?1928 billion (US$18 billion), which translates into a year-on-year increase of 16.5% according to data released by the State Bank of Pakistan.

According to a World Bank Report, remittances to developing countries fell for a consecutive year in 2016, a trend which has not been seen in the last three decades. According to the World Bank’s estimates, officially recorded remittances to developing countries amounted to $429 billion in 2016, a decrease of 2.4% from 2015’s numbers of $440 billion. Global remittances which includes inflows to high-income countries contracted by 1.2 percent to reach $575 billion in 2016 from %582 billion in 2015.

The causes for decline have been multifaceted. Declining oil prices, weak economic growth in GCC countries and the Russian Federation have taken their toll on remittances to South Asia and Central Asia whereas muted growth in Europe has reduced flows to the Northern and Sub-Saharan Africa. The decline in remittances when measure in US Dollar was made worse by a weaker Euro, British pound and Russian ruble against the dollar. Remittances to South Asian region declined by an estimated level of 6.4 percent to reach $110 billion in 2016 due to lower oil prices and fiscal tightening in the GCC countries. In addition to the decline in remittances to India and Bangladesh, Nepal also saw a contraction of 6.7 percent, while Pakistan saw modest growth of 2.8 percent. Remittances to the region are expected to grow by a muted 2 percent to $112 billion in 2017.

Pakistan’s reliance on Remittances to decrease its Current Account Deficit in the last few years has grown substantially after a decrease in exports. Worker’s remittance is the largest source of foreign exchange earnings after exports. During July-April FY 2016, the remittances have reached to $16.034 billion as compared to $15.235 billion in same period last year, recorded a growth of 5.25 percent over the last year.

Traditionally, remittances increase for the month of Ramzan, last year the month of June (Ramzan) saw a month on month increase of 13 percent. Inflows increase because overseas Pakistanis send Zakat and charity funds to the needy back home. Also, the remittances increase owing to the Eid celebrations. Reliable sources say that the remittances in the first three days of Ramzan have sharply increased by an estimated level of 18 percent. The rise in remittances could help Pakistan achieve or even cross last year’s Remittance’s tally of 19.28 billion for the current fiscal year ending in June.