Remittance woes

While CPEC and development under it is largely taken as good news for the country, dipping remittances and receding exports present the not-so-pleasant external account situation. Slowdown in remittances have joined the declining exports and FDI in pushing up the current account deficit, which stood at $3.6 billion in 1HFY17 versus $1.7 billion in the same period last year.

Though the remittances for the first seven months of FY17 were around $10,946 million, down by a meagre 1.85 percent year-on-year, it is the gradual slowdown trend that is a worrying factor for the policy makers at home. Remittances for January 2017 alone stood $1,488 million, up by only 1.5 percent, year-on-year, and down by 6.1 percent sequentially.

Country-wise details for January 2017 show that remittances from Saudi Arabia, the largest source country continued to fall with a year-on-year decline of over six percent amid the countrys attempt at curtailing costs. In the seven-month period, these inflows from the kingdom were down by 5.7 percent year-on-year. Inflows from Saudi Arabia and the GCC world have seen a pinch in these times of low oil prices and hence lower revenues for the oil producing nations. Apart from extensively delayed payment of salaries and/or layoffs, Saudi Arabia has recently been reported to have deported around 40,000 Pakistanis in just the last four months that could have a further slowing down affect in the months to come.

As for remittances from the western countries, inflows from the US and UK are also down by around nine and 11 percent, respectively, on a year-on-year basis. And now with Trumps Muslim ban carrying significant chances of being extended to Pakistan, foreign inflows from the US could also further come under fire.

Since around 65 percent of the remittances come from Saudi Arabia and the Gulf region, a lot depends on the oil prices for these foreign inflows, especially after job cuts and deportation of workers back home. A silver lining in this case is OPECs consensus to curtail output for higher oil prices; OPEC has recently delivered more than 90 percent of the output cuts they promised. If things keep moving in this direction, workers remittances may find a fillip of hope with higher oil prices.