It is gratifying that when most of the economic indicators of the country are deteriorating, the news on the external sector accounts are satisfactory. According to the latest data released by the State Bank, overseas Pakistani workers remitted a historic amount of dollar 1.365 billion in October, 2012 as compared to dollar 1.018 billion in the same month last year, showing a tremendous jump of dollar 347 million or 34.11 percent.
The previous highest amount remitted in a single month by overseas Pakistanis was recorded at dollar 1.310 billion in August, 2011. A positive aspect of this healthy development was that remittances received from all the countries showed an impressive growth. The inflow of remittances from Saudi Arabia, the UAE, the US, the UK, GCC countries (Bahrain, Kuwait, Qatar and Oman) and the EU countries amounted to dollar 348 million, dollar 294 million, dollar 218 million, dollar 197 million, dollar 163 million and dollar 37 million, respectively compared with the inflow of dollar 291 million, dollar 217 million, dollar 167 million, dollar 118 million, dollar 132 million and dollar 28 million respectively in October, 2011.
Aggregate remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries also went up to dollar 128 million as against dollar 65 million in the same month last year. Remittances received during the first four months of FY13 amounted to dollar 4.964 billion, also showing an impressive growth of dollar 649 million or 15 percent during this period. If the present trend continues, home remittances could be as high as nearly dollar 15 billion during FY13.
Pakistan's trade deficit has also narrowed during the first four months of the current fiscal year. While exports have gone up by 4.98 percent to dollar 8.203 billion from dollar 7.814 billion in the same period last year, imports have declined marginally by 0.54 percent from dollar 14.723 billion to dollar 14.643 billion during this period. As a result, trade deficit has fallen by 6.79 percent from dollar 6.909 billion last year to dollar 6.440 billion during July-October, 2012. It means that trade deficit of the country during FY13 is not likely to exceed the target of dollar 17.126 billion by a considerable margin.
Labour issues in China and Taiwan and renewed interest of European buyers in our exports due to waiver on 75 products and the possibility of the grant of GSP plus status to Pakistan may have contributed towards increase in exports while demand for imports continues to be sluggish due to a stagnant economy. So far as increase in remittances is concerned, credit for raising their level is generally given to Pakistan Remittance Initiative (PRI) launched jointly by SBP, Ministry of Overseas Pakistanis and Ministry of Finance in April, 2009 to facilitate and support faster, cheaper, convenient and efficient flow of remittances.
Whatever the reasons behind these positive developments and besides a variety of views on the subject, a sharp increase in remittances and narrowing down of trade deficit would definitely contribute towards an improvement in the current account balance of the country. This would serve to reduce pressure on the Pak rupee, arrest the declining trend in foreign exchange reserves of the country to a certain extent and avoid the chances of insolvency in near future. Indirectly, such a healthy outcome could continue to facilitate import of raw materials and other investment goods for industry, promote growth and employment and contain inflationary pressures in economy. However, while welcoming these positive developments, we would urge upon the government to keep a very close watch on the situation in order to ensure the continuity of this robust trend.
Most of the analysts are not very optimistic about the persistence of rising trend in remittances in future due to a variety of reasons and would like the government to concentrate basically on the expansion of exports for bringing an improvement in country's BoP on a sustainable basis. We feel that such an approach has a merit although there is also no harm in perfecting the policy framework to maximise the inflow of home remittances at the same time. Anyhow, a combination of fitting policies at home and certain favourable exogenous factors like the grant of GSP plus status to Pakistan and stability in international oil prices could support the external accounts of the country to enable it to pay back heavy IMF instalments due in the year and avoid doomsday scenario in the foreign sector predicted by most of the pundits.
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