Growth in remittances - a lifeline for country’s forex reserves – has been losing steam off late. The latest SBP numbers show that 4MFY18 inflows were just two percent up from 4MFY17 aggregates, while the same were merely one percent up year-on-year in 1QFY18.
As the column had previously mentioned that the real test of remittances will begin in October onwards because of the seasonal effects witnessed in Aug-Sept inflows (on account of Eid ul Azha), it can be seen that the October continue to remain slow. While the monthly inflows seem to have come out of the seasonal impact by rising 28 percent month-on-month, the year-on-year growth for October was only six percent.
The GCC accounts for around 60 percent of these inflows on average, and the column has talked about the decline of the inflows from Saudi Arabia at length including both the structural changes and the recent HBL saga (Read: Is HBL saga behind Sep remittance drop? published on November 02, 2017). The October continues to show the weakening inflows from this region that accounts for maximum growth. Saudi Arabia depicts a decline of around two percent, while inflows from UAE and the rest of the GCC were down and up by seven and one percent, respectively.
Things are not the same in Saudi Arabia because of the structural and demand/supply changes. ADB in its recent report has also forecasted that remittance are likely to slow down further from the Gulf countries and Saudi Arabia as they have curtailed their investment plans due to weaker crude oil prices.
In his one of the last interviews before the arrest, Prince Alwaleed bin Talal had talked about how allowing women to drive and not hiring foreign drivers could help them save around $3800 riyal ($1000) a month on average, which could be pumped back into the Saudi economy, rather than being sent back by migrant workers to their home countries. If that’s the objective behind the change in policy, the impact could be significant as around 11 percent of the total registered workers for overseas employment by the Bureau of Emigration & Overseas Employment from Pakistan are drivers around the world.
Nonetheless, as the drop in remittances has been somewhat arrested in October, PRI’s efforts have started showing some signs. The Central Directorate of National Savings (CDNS) has just developed a new product, Overseas Pakistanis Savings Certificates (OPSCs) aiming at targeting remittances from non-banking channels and savings not channelized in Pakistan currently. According to recent news reports, the new PRI product can fetch initial investment between $500-1200 million per annum, which is calculated on the basis of one-fourth of 4.5 million overseas Pakistanis living in the GCC, if each one of them invests merely $500 in this product in a year.