Home »Editorials » Home remittances:timely rise

It is indeed gratifying to note that home remittances are showing a respectable growth when other components of the balance of payments are still in a poor shape. According to the latest data released by the State Bank of Pakistan, overseas Pakistani workers remitted dollar 9.028 billion during July-November, 2018 as compared with dollar 8.021 billion in the corresponding period of last year, showing an increase of dollar 1.007 billion or 12.5 percent. Highest inflows of dollar 2.152 billion (+2.5 percent) were recorded from Saudi Arabia, closely followed by the UAE with remittances of dollar 1.95 billion (+10.6 percent) while the USA came in third, with inflows surging by 33.2 percent to dollar 1.393 billion during the period. Malaysia also emerged as a significant source of remittances jumping by 53.3 percent to dollar 616 million. Remittances from the UK also grew by 14.2 percent to dollar 1.286 billion and edged up 2 percent to dollar 265 million from the EU. On the other hand, remittances from GCC countries fell by 6.8 percent to dollar 876 million during the first five months of FY19. However, on a monthly basis, home remittances plunged by 19.6 percent to dollar 1.609 billion in November compared to dollar 2.0 billion in October, 2018. There was a decrease in inflows as remittances from Saudi Arabia fell to dollar 395 million as against dollar 494 million in October, the USA dollar 255 million from dollar 308 million, the UK dollar 228 million from dollar 298 million and the UAE dollar 343 million from dollar 412 million. The decline in remittances from most of the countries during November, 2018 is of course a cause of worry and could partly be explained by a fall in international oil prices and excessive fluctuations in the rupee-dollar parity in November, 2018.

A handsome growth in home remittances during July-November, 2018 is of course a very welcome development for the country, especially at a time when C/A deficit has widened to unsustainable levels, foreign exchange reserves of the country are dwindling fast and authorities of the country, including the Prime Minister, are so much concerned about the size of gap in the external sector that they have visited several friendly countries to seek financial assistance and are also in constant touch with the IMF to negotiate another programme to tide over the situation and avoid insolvency. Obviously, such a sharp increase in remittances would play a positive role in narrowing down the C/A deficit, maintaining exchange rate stability, softening inflationary pressures, etc. Since remittances are an unrequited transfer, these will neither raise the debt stock of the country nor reduce availabilities in the economy through increase in exports or reduction in imports. Another peculiar aspect this time is that inflows of remittances from Saudi Arabia which had tended to fall or stagnate have shown some growth while Malaysia has also emerged as a new significant source of remittances. A substantial decline of nearly 20 percent in remittances during November over October, 2018 is, nonetheless, disturbing and warrants a closer scrutiny so that this trend is not repeated in the coming months.

It goes to the credit of the present government that it has very rightly accorded the highest priority to the current unsustainability of the external sector deficit which was inherited by it and taken a number of steps to narrow the C/A deficit. The new government seems determined to crack down on illegal transactions of money, including remittances where the open market offers somewhat higher rates than the official rates. Tightening of illegal transactions seem to be yielding positive results as most of the inflows are now believed to be coming through proper banking channels. The difference between the rates in the open market and inter-bank has also narrowed to incentivise the expatriates to send money through proper channels. The government is trying to send almost 100,000 Pakistani workers to Qatar, thus boosting the chances of higher home remittances in future. More important than these steps are efforts by the government to increase exports and contain imports through a number of measures including sharp devaluation of the rupee and containment of imports through regulatory duties, etc., to improve the overall picture of the foreign sector. It is precisely due to these efforts that trade deficit during July-November, 2018 has also fallen by 2.0 percent to dollar 14.51 billion from dollar 14.81 billion in the corresponding period a year ago. Hopefully, if the present government continues to pursue the right policies, the crisis in the external sector may be over in a year or two.

Copyright Business Recorder, 2018


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