Remittances remain faithful

With the economy sailing into choppy waters, the growth in remittances continues to provide some shock mitigation capabilities. Data from SBP for April 2019 shows that the inflows from overseas Pakistanis stood six month’s high at $1,779 million for April 2019, and up by 6 percent year-on-year. On a cumulative basis, the inflow of this foreign exchange was up by 8.45 percent in 10MFY19 on a year-on-year basis. With GDP growth rate expected to nosedive as domestic demand slows down, and the economy aiming to correct the macroeconomic imbalances as the country enters the IMF program, remittances are likely to provide the much needed cushion.

The narrative of country-wise inflows in these 10 months is the same where US and UK have become strong destinations for remittance senders in times when the Middle East’s luster is dimming. USA and UK accounted for 31 percent of total remittance in 10MFY19. However, some recovery can be seen in remittances flowing in from Saudi Arabia; money sent from overseas Pakistanis from KSA increased by around two percent year-on-year in 10MFY19 versus a decline of over 9.5 percent in 10MFY18.

Moving onto other corridors, the data from SBP shows that remittances from Malaysia continue to prosper, growing by 35.7 percent year-on-year, versus 5.7 percent growth witnessed in 10MFY18. On the other hand, 10MFY19 inflows from Europe, Norway, Canada and Japan have declined on a year-on-year basis, compared to growing remittances from the same regions in10MFY18 year-on-year.

Meeting the annual remittance target seems to be on track. The remaining two months of the fiscal year i.e. May and June might witness even higher inflows on account of Ramazan and Eid-ul-Fitr. Historical data shows that the in Gregorian month where Eid-ul-Fitr falls and a month preceding that usually has higher monthly inflows than average.

But what is needed is some sort of a thrust that could push growth further in times when all other avenues of foreign exchange are under severe pressure and the currency has been depreciated massively, and is expected to depreciate further. PRI and SBP initiatives have been facilitating, and some more innovation in fields like labor export and diversification and tie ups could help achieve that increased growth.