August 18, 2020 (MLN): Working remittances got off to a good start for the FY21, reaching USD 2,768 million in July’20, the highest ever amount for a single month. This was 12.2 % MoM higher than Jun’20, the previous high, making it two months in a row of high remittances.
One doesn’t have to look far for where the size of the remittances originated as it was almost entirely Saudi Arabia, followed by UAE, the research of JS Global revealed.
The global economic slowdown raised concerns that remittances would fall due to an increase in workers’ layoffs in remitting countries. The State Bank of Pakistan said, ‘given the impact of Covid-19 globally, this increase in worker’s remittances is encouraging.’
In the month of July, Pakistan received the sizeable amounts of workers' remittances from Saudi Arabia (US $ 821.6 million), UAE (US $538.2 million), UK (US $393.9 million) and USA (US $ 250.6 million).
The highest share by far came from Saudi Arabia, accounting for 30% of the total inflows due to the large share of expatriates from Pakistan working in Saudi Arabia and the depreciation of the PKR rupee against the Saudi Riyal. This is followed by UAE with a share of 19% and the UK with 14%.
The growth rate in remittances compared to the same month in the previous year is around twice as high as the Eid-ul-Adha related seasonality typically experienced over the last decade, the SBP mentioned.
According to the statement by SBP, there are other several factors that 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.
As per news flows, the usage of legal banking channels and money exchanges increased significantly for transfer due to a lack of traveling amid the COVID-19 pandemic. Hawala or Hundi business is also down which might be one of the reasons for record-high remittances.
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