The remittances received from overseas Pakistanis continue to provide a much-needed breather when FDI and aid inflows have been reduced to a trickle. Latest data released by the State Bank of Pakistan show that the remittances for the nine-month period ended March 2013 had grown by 6.35 percent to settle at $10.35 billion-thats an additional $618 million in foreign exchange compared to same period of last year.
The data show that this YoY growth has primarily come from rising inflows through remitters residing in countries such as the United Kingdom, Saudi Arabia, Abu Dhabi, Bahrain, Kuwait and Oman. The remittance proceeds from the United States and Dubai; however, declined during the period.
A positive highlight of the data released is that the remittance figure for the month of March increased month-on-month by almost nine percent, helping defuse the menace of declining inflows seen over previous two months. That helped increase the average monthly remittance inflows during 9MFY13 to $1.15 billion, up from the $1.08 billion average monthly receipts for the same period of the last fiscal year.
These inflows have registered impressive growth rates in recent years. The central bank has attributed continued growth in workers remittances to the efforts of Pakistan Remittance Initiative, which is tasked with facilitating both the senders and receivers of the repatriated funds. But the slowdown in remittance growth is a cause of worry, especially when it has emerged as the primary fallback in the face of dwindling inflows.
The growth in remittances has considerably slackened in the ongoing fiscal year. Compared to the YoY growth during 9MFY12 which was an imposing 21.4 percent; the current fiscal year has so far thrown up a growth rate that is less than a third of that.
The low-base factor is there, but the difference is visible when seen in absolute terms for the July-March period. For instance, the remittances received during 9MFY12 were $1.72 billion more than that of the preceding year. This fiscal year, however, the incremental remittances over previous year dropped to an amount of $0.61 billion during the period under review. What is causing this slowdown?
Dr. Ashfaque H Khan, the Dean of NUST Business School and former advisor to the Finance Ministry, told BR Research that the previously high growth rates in remittances were an anomaly when compared to the remittance inflows to other developing countries. "A growth rate of five or six percent can be called
ormal. But, growth rate twice or thrice that size is simply rerouting of black money, which was allowed to go unchecked in previous government," he reiterated his long-held position on this matter.
As the incremental remittance inflows are dropping fast, their ability to contain the widening current account deficit will decrease. Its a complex question whether remittance growth will rebound. There are intricate factors on the supply side (remitters employment conditions, disposable incomes, etc.), the demand side (e.g. impact of prices on remittees household budget), and whats in between (shift towards formal remittance channels and changes in in-country regulations) that will determine the future.
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