Continuous stagnation in home remittances over the recent past is of course a matter of great concern. According to the latest data released by the State Bank, overseas Pakistani workers remitted $ 4.79 billion in the first quarter of FY18 as compared to $ 4.74 billion remitted in the corresponding period of last year, showing an increase of nearly one percent or $ 50 million. A detailed analysis has revealed that out of three major corridors, inflows from Saudi Arabia indicate a declining trend while inflows from the US and the UK move up during the first quarter. With a 7 percent decline, inflows from Saudi Arabia stood at $ 1.23 billion during July-September, 2017 compared to $ 1.32 billion in the same period of last fiscal year. Workers' remittances from the US soared by 2 percent to $ 626 million in the first three months of this fiscal compared to $ 613 million in July-September, 2016 while inflows from the UK swelled by 17 percent from $ 550 million to $ 643 million in the same period. However, more worrying was the trend in home remittances on month-on-basis. During September, 2017, inflows of workers' remittances amounted to $ 1.294 billion which were 34 percent lower than of August, 2017 and 20 percent less than of September, 2016. Higher inflows of $ 1.954 billion during August, 2017 could partly be attributed to Eid-ul-Azha when expatriates usually send higher amounts for Eid festivities back home. Details for September, 2017 showed that inflows from Saudi Arabia, the UAE, the US, the UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU countries amounted to $ 308.05 million, $ 302.77 million, $ 171.9 million, $ 194.76 million, $ 141.02 million and $ 45.07 million, respectively, compared with the inflows of $ 437.87 million, $ 361.9 million, $ 211.14 million, $ 210.22 million, $ 182.18 million and $ 43.60 million, respectively, in September, 2016.
A stagnation in the level of home remittances during the current year so far and a steep fall in September, 2017 are of course very disturbing developments. The matter becomes all the more serious when other components of the balance of payment (BoP) like exports, imports, external debt servicing and FDI are also witnessing negative trends. Another worrying aspect is that home remittances are not likely to resume their past increasing trend anytime soon. The Middle Eastern countries which are our major source of remittances are making fiscal consolidation efforts due to low oil prices in the international market and sending back foreign nationals to their home countries to save jobs for their own population. Developed countries, particularly the US, have tightened anti-money laundering/anti-terrorist financing laws. The overseas Pakistanis are finding it difficult to send even their genuine incomes back home with ease. Anyhow, it is not difficult to visualise the impact of a decline or stagnation in home remittances. Current account (CA) deficit of the country could widen further, exchange rate of the rupee could come under pressure and the country would be obliged to fill the gap in the external sector through increased expensive foreign borrowings. At some point, Pakistan may also be constrained to negotiate another programme with the International Monetary Fund (IMF) to deal with this unpleasant situation with harsher conditionalities.
It may be mentioned here that most of the factors impacting the flow of remittances are not in country's control. Pakistan cannot dictate, for example, the level of international oil prices or the labour recruitment policies of the host countries. However, there are few minor options which could be exploited to neutralise some of the negative impacts. For instance, some of the friendly countries, particularly in the Middle East, could be persuaded to spare the livelihoods of our workers in order to maintain the present flow of home remittances. PRI, which has lost much of its steam, could be reinvented to make it more useful. It also needs to be ensured that there is no big exchange difference between official and unofficial markets so that expatriates are not tempted to send their remittances through non-banking channels. Some of the Pakistanis may be holding back their remittances due to the anticipated depreciation of the rupee. The problem may be managed through reduced intervention of the SBP in the FX market in order to let the rupee find its real value in the market. Finally, it needs to be recognized that it is the exports and not home remittances that could support the balance of payment (BoP) on a sustainable basis. The recent measures announced by the government after its ECC meeting to expand exports and contain imports of non-essential items could help in a small way but are not a lasting situation to the unfolding crisis in the BoP of the country.