Despite the month-on-month decline in remittances in June and July this year, remittances have remained on the higher side during the last three months—between $2.9 and $3.2 billion. According to the most recent data released by the central bank, remittances in July-24 totaled $2.995 billion—down 5 percent month-on-month but up 48 percent year-on-year. Over the last three months, these inflows have almost stayed above the $3 billion level. The slowdown in inflows in the month following Eid ul Ezha could partially explain the month-on-month decline in Jul-24.
Also, this considerable increase marks the fifth consecutive month in which remittances have exceeded $2.8 billion, a significant increase over the monthly average of $2.3 billion recorded in FY23 and much of FY24.
The rise in remittances was much needed, as evidenced by the support it provided to the current account, particularly amid normalizing repatriation outflows. What has driven remittances off late? The growth in these foreign inflows is attributed to the relatively stable domestic currency, driven by the narrowing gap between interbank and open market exchange rates and tightened foreign exchange regulations that have encouraged a shift of remittances towards official channels.
And this is also evident in country-wise inflows, where the UAE has shown the most significant growth, with remittances from the region almost doubling year-on-year. UAE’s share in total remittances has increased from 16 percent to 20 percent. Remittances from Dubai were the highlight of Jul-24 inflows, as they alone accounted for 16 percent of the total remittances, reflecting a remarkable 93 percent year-on-year growth. This is likely due to lower money laundering amid tight controls. Saudi Arabia and the UK maintained their contributions of 25 and 15 percent, respectively. However, remittances from the USA and the EU were sluggish as their shares fell to 10 and 12 percent, respectively.
The remittance growth is giving a much-needed boost to the country’s economy. The resultant improvement in fundamentals is boosting the confidence of expatriates. In FY24, remittances grew by 11 percent year-on-year to $30.3 billion, with an optimistic forecast for FY25 as more workers go abroad. However, what could affect the positive trend includes a sustained growth in oil prices that have remained tepid recently and a return of volatility in the currency exchange rate.
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