Remittances up 26% YoY in January - are USD finally pouring?

February 12, 2024 (MLN): Any economic good news after the recent elections is welcome. Pakistan's January's remittances flow has seen a handsome growth of 26% to clock in at $2.4 billion. Though similar to last month's but much better than even the best year of 2022's January numbers of $2.2bn. 

Economic stability is gradually kicking in as parallel grey markets for USD are diminishing. With extremely tight monetary and fiscal policies, demand for foreign currency as store of value is decreasing as PKR has remained stable for nearly a year (March 23 and Feb's 24's interbank rate of PKR 280/USD).

Caretakers - coupled with SIFC's pressure - has sent clear warnings to exchange companies, speculators and investors as well. 

Consolidation of the exchange company along with incentives given by govt on increased remittances to Banking sector is helping country remain afloat.

Although the external debt repayments requirement warrant much higher export growth, debt elongation and NPV positive foreign investment nevertheless currency markets are in balance. 

With 20% risk-free returns, capital is away from USD (yet). Keep up the pace with IMF reforms, and stability would continue.

The Current Account may need to remain near balanced or max 1-2% of GDP to attain optimum balance of stability, growth, debt deleveraging and tax widening. Long way but every month matters.

The author is an independent economic analyst and writes on Twitter and Linkedin.