Uptrend in home remittances

It is very good to see that our home remittances have continued to rise, giving much-needed support to the balance of payments (BoP) . According to the latest data released by the State Bank of Pakistan (SBP), overseas Pakistanis have remitted an amount of dollar 12.77 billion during the first seven months (July-January, 2019) of the current fiscal year which is higher by 12.2 percent than dollar 11.38 billion received in the corresponding period of last year. The increase in remittances was more pronounced from the non-GCC countries, especially from the US and the UK, mainly due to improving macroeconomic conditions and seasonal inflows. Home remittances from the US shot up by 33.25 percent to reach dollar 2 billion compared to dollar 1.5 billion in the same period of last year while inflows from the UK rose steeply by 22.51 percent to dollar 1.94 billion. The inflows from Saudi Arabia continued to be the largest at dollar 2.907 billion though the increase is a meagre 1.9 percent during July-January, 2019 compared to the same period of last year. Inflows from the UAE, the second largest contributor of home remittances, recorded at dollar 2.7 billion during the said period, posting a growth of 7.5 percent. However, remittances form the GCC region and the EU declined by 7.0 percent and 4.19 percent, respectively, during the period. Month-on-month basis, inflows of workers' remittances amounted to dollar 1.743 billion during January, 2019 - lower by 0.3 percent than December's last year but higher by 6.4 percent compared with January, 2018. It is obvious that if the present trend in home remittances continues in the remaining period of the current fiscal, these could reach a record level of nearly dollar 22 billion.
A sharp increase in home remittances during the current fiscal year is of course a very healthy development for the country. It is fortunate that home remittances have shown a robust growth when the country is facing acute problems in the external sector. In fact, home remittances are now almost equal to the total export receipts of the country and significantly contributing towards containing the C/A deficit and maintaining foreign exchange reserves of the country at a satisfactory level. There is no denying the fact that without such a positive development, C/A deficit would have been higher, exchange rate of the rupee could have depreciated further, exacerbating inflationary pressures and making the lives of ordinary people more miserable. Besides, investor sentiment would have been negatively affected and there could have been question marks by now about the solvency of the country. Fortunately, there are also other happy tidings in the external sector. According to the latest data available from the Pakistan Bureau of Statistics, trade deficit of the country has narrowed by 9.6 percent during the first seven months of the current fiscal compared to the corresponding period of last year while it has plunged by 32 percent in January, 2019 compared to the same month of last year. While appreciating signs of improvement in the crisis-hit foreign sector, it needs to be highlighted that such a development would not have been possible without hectic efforts by the incumbent government. It has devalued the Pak rupee substantially, imposed higher tariffs on non-essential items to curb their imports and is actively engaged in negotiating a programme with the IMF to ensure domestic and foreign investors about the continuity of reforms agenda. To avoid insolvency staring in our face, Prime Minister Imran Khan had to visit friendly countries to seek financial assistance urgently. Qatar has also agreed to provide 100,000 jobs to Pakistani labourers which could significantly increase the inflows of remittances in future.
As for the reasons of an increase in home remittances, it could be due to several reasons, including increasing economic activity in countries such as the US and the UK, higher family needs back home due to increasing inflation, narrowing of official and unofficial exchange rate of the rupee, incentivising expatriates to send money through banking channels, strict monitoring of the exchange companies by the SBP and intelligence agencies and tightening of monetary policy which has served to offer relatively better rates of returns on the rupee-denominated assets. We can only propose to the government to help ensure the rising trend in home remittances because a lot of ground has still to be covered to reach the goal of sustainable position in the external sector of the country. After all, every dollar of home remittances, which is an unrequited transfer, is welcome when the country is so much dependent on borrowings from external sources.