It is indeed a welcome change that the level of home remittances, after showing a dip in the preceding year, has increased sharply during the first two months of FY18. According to the latest data released by the State Bank, inflows of remittances sent by overseas Pakistanis rose by 13 percent or dollar 407 million to dollar 3.496 billion during July-August, 2017 compared with dollar 3.089 billion received in the corresponding period of last year. A detailed analysis revealed that increase was recorded from all major corridors including Saudi Arabia, the UAE, the US and the UK. While workers' remittances from the US soared by 15.42 percent to dollar 1.929 billion, inflows from the UK shot up by 33 percent or dollar 112 million. With a 3.89 percent surge, inflows from Saudi Arabia stood at dollar 920.12 million in the first two months of this fiscal year compared to 885.95 million in the same period of last year. In addition, inflows from the UAE rose by 11 percent to dollar 775 million. During August 2017, workers' remittances amounted to dollar 1.954 billion - an amount which was 26.78 percent higher than a month earlier and 11 percent higher than August 2016. Again, the inflows of home remittances from almost all the countries during August 2017 were higher than those of the previous month.

The increase in inflows from all major sources is of course an indication that the trend of negative growth witnessed during 2016-17 has reversed. This is of course a very positive development for the country, especially at a time when exports are declining, imports are on the up, current account balance of the country is under a great deal of stress and foreign exchange reserves are on the decline. If the present trend continues, the country could receive foreign remittances between dollar 20-dollar 21 billion during FY18 which would be a substantial increase from last year and a big help to the balance of payments. Obviously, such a sharp increase in home remittances would be helpful in narrowing down the current account deficit, building foreign exchange reserves and imparting stability to the exchange rate of the rupee. It may be mentioned that home remittances are unrequited transfers and do not increase external indebtedness of the country.

The jump in home remittances could be attributed to a number of factors. The most important factor could be the celebration of Eid-ul-Azha during this period when most of the expatriates remit money back home for religious requirements and other purposes. However, such an assertion could only be partly true because Eid-ul-Azha also happened to be almost during the same period of last year. The government sometimes takes the credit for initiating "Pakistan Remittance Initiative (PRI)" to bolster the level of home remittances but this policy has also been in vogue for the past few years. The closure of gap between the official and unofficial rate of rupee and greater use of technology and publicity by banks may, however, have made a difference. Anyhow, while welcoming such a rise in home remittances, it needs to be ensured that such a healthy trend is maintained and other components of the balance of payments, especially exports, are also improved to reduce the C/A deficit and contain the external indebtedness of the country. The rise in home remittances, however, could act as stop-gap arrangement to narrow the balance of payments deficit but cannot be a substitute to earn foreign exchange on a sustainable basis.

Copyright Business Recorder, 2017