If January 2018 saw a much-needed respite in the slowing pace of remittance growth, the latest tick has brought some of those worries back.

According to State Bank of Pakistan (SBP), remittances growth slowed to 3.4 percent in 8MFY18, as against 3.5 percent in 7MFY18. That may look marginal. But consider this: the growth in February 2018 was a mere 2 percent year-on-year, compared to 10 percent year-on-year growth in the month before.

The biggest dent to growth comes from falling inflows from Saudi Arabia as a result of which, its share in total remittances has eased to 25 percent. Saudi Arabia’s falling share is being taken by the UK that has been witnessing sharp increases in the fiscal year to date. The latter is because of active marketing efforts by Pakistan Remittance Initiative in the UK, as well as the British pound’s appreciation against the greenback. (For details, see BR Research Remittances: how long will breather last, Feb, 14, 2018)
https://www.brecorder.com/2018/02/14/398979/remittances-how-long-will-breather-last/

The question is where the full year number will stand, now that 8M number sits at $12.8 billion. Recall that the FY18 target was set $20.7 billion. If the year-to-date trends in light of the historical trends are anything to go by, that target will likely be met. Or perhaps fall just a little short. Historically, the 8M numbers have equaled about 64 percent of the full year number. By that account alone, the full year number should land at about $20 billion.

And while it’s too soon to forecast the impact of the launch of mobile banking/branchless banking remittance products, suffice to say that the seasonal affect of Eid-ul-Fitr (expected mid-June) will jack up remittance inflows by the end of June 2018.

The real test will be from Saudi Arabia. The fall in remittance inflows from Saudi Arabia ($310mn) has eroded about 42 percent of the gains from all other countries ($733mn) in 8MFY18. If this worsens, the full year target may not be met. But there are two admittedly-weak straws of hope to hold on to for now.
First, inflows from Saudi Arabia have improved on month-on-month basis since September 2017 when it recorded an inflow of $308 million, its lowest monthly inflow since November 2012. It’s soon to say the worst is over, but the direction has been positive on sequential basis since September 2017.

Second, as SBP governor Tariq Bajwa highlighted in a recent interview with BR Research, Saudi Arabia’s imposition of tax on all migrant dependants is forcing many migrants to send their families back home. (See Brief Recording ‘The jury is divided on the impact of PKR depreciation’ February 23, 2018).
https://www.brecorder.com/2018/02/23/400874/the-jury-is-divided-on-the-impact-of-pkr-depreciation/

As a result of this tax, remittance inflows from that corridor might increase, he said. One can only hope that Bajwa is right because the statistics of Pakistan’s labour exports to Saudi Arabia in CY17 show a dismal picture. More on that later!