Remittances from Middle East unaffected by Yemen crisis

KARACHI: Remittances from Pakistanis in the Middle East have not been affected by the ongoing war in Yemen, where warplanes from Saudi Arabia and Arab allies struck at rebel forces, experts said on Wednesday.
However, a wider conflict in the Middle East and possible dislocation of Pakistanis in the region could have a long term effect on Pakistan’s economy and inflow of remittances, they added.
“The direct and indirect impact on the economy depends on the complexity and duration of the conflict and the role assumed by the Pakistani government,” said Dr Muhammad Yaqub, former governor State Bank of Pakistan (SBP) told The News.
“If the conflict is confined to Yemen only there would not be much of an impact on overall remittances,” he said. “There was not much of Pakistani labour force working in Yemen.”
In fact, in the short term, remittances may increase from Yemen, since many returning immigrants will carry back their savings with them, he added.
Workers’ remittances—the non-debt creating foreign exchange inflows and a much needed breather to the country’s economy, continues to show its upward trajectory due to receiving heavy amount of remittances, especially from Saudi Arabia, United Arab Emirates (UAE) and GCC countries.
Overseas Pakistani workers sent home $11.750 billion in eight months (July to February) of the current fiscal year against $10.248 billion during the same period last year.
Out of the total $1.391 billion remittances in February 2015, Pakistan received $453.40 million, $316.51 million and $166.26 million from Saudi Arabia, UAE and other Middle Eastern countries.
The government has fixed $16.7 billion remittances target for the current fiscal.
The historical trend of remittances cash flows showed that remittances from Saudi Arabia increased from $1.917 billion in FY10 to $4.729 in FY14.
Similarly, remittances for UAE stood at $3.109 billion in FY14 against $2.038 billion in FY10.
Pakistani workers living in GCC states remitted an amount of $1.860 billion in FY14, compared with $1.237 billion in FY10.
“The conflict between Saudi Arabia and Yemen is unlikely to have broad impact on our economy,” said Salim Raza, former governor SBP.
“This is an internal tension between the both countries. We have to wait to see weather conflict will prolong. It could be more pronounced for the Saudi economy if [it] continues for [too] long,” Raza said.
Faisal Mamsa of Landmark Capital said, “It’s highly likely that remittances will get adversely affected, not just due to the military operation but also because most GCC states are now running large budget deficits on the back of low oil prices.”
“But the effect may not be material because of the strong participation of the private sector and other lending institutions,” he added.
Crude oil prices remain under pressure in global commodities market following the ongoing tension in Middle East. The traders are eyeing weather the crisis will hit the supplies of the oil in the market or not.