November 15, 2018 (MLN): Inflows of workers' remittances for the month of October increased by 21% YoY to US$2 billion, as per the latest data released by the State Bank of Pakistan.
According to Economist Intelligence Unit (EIU), the total remittances touched the US$2 billion mark for the second time in October this year. Furthermore, this figure was higher than the average monthly remittances of around US$1.7 billion. This development is in line with the expectation that remittances will increase in current fiscal year compared to 2017.
A key driver for the increase in October inflows was the weakening of the Pakistan rupee during the past year, with the latest depreciation being 7.5%. It is safe to say that a weak local currency made it more attractive for expatriate Pakistanis to remit higher amounts.
Higher inflows this year are also likely to have been driven by rising oil prices and improved economic conditions in Gulf countries, home to the majority of Pakistani overseas workers.
Remittances from Saudi Arabia posted a rise of 7.3% in October this year. With global oil prices expected to rise slightly further in 2019, strong remittances in 2019 are expected.
Crucially, high remittance inflows will not prevent a widening of the current-account deficit this year, which will result in an estimated US$18.3 billion, the equivalent of 5.8% of GDP.
However, it is expected that an IMF bail-out programme that is likely to begin in early 2019, along with supplementary loans from bilateral donors, will allow Pakistan narrowly to avoid a balance-of-payments crisis.