Remittances jump to highest in two years in March as Eid rush boosts inflows

KARACHI: Remittances soared to their highest in nearly two years in March, buoyed by an uptick in funds sent by overseas workers ahead of the Eid festivities and a shift towards more regulated channels for money transfers.

According to data issued by the State Bank of Pakistan on Monday, remittances reached $3 billion in March, a monthly level not seen since April 2022. Remittances rose by 16.4 percent year-on-year. Additionally, these inflows rose by 31 percent in March on a month-on-month basis. The country brought in $2.3 billion in remittances in February 2024.In the first nine months of the fiscal year 2023–2024, Pakistani migrants sent $21 billion in cash home, up 0.9 percent from a year earlier.

Analysts say that since October 2023, the country’s foreign remittances have been steadily increasing, helped by incentives and regulatory reforms that have directed inflows through official channels.

Historical trends indicate that Pakistanis residing overseas send record-high amounts of remittances throughout Ramadan and before the annual Eid festivities.The holy month frequently draws larger flows because of family obligations, welfare, charitable giving, etc.

“Remittances increased mainly because of the Ramadan factor and the diversion of flows from hawala/hundi to formal channels as the spread has now shrunk to 1-3 percent against more than 10 percent in the same period last year,” said Awais Ashraf, director of research at Akseer Research.

Workers’ remittance inflows during March were mainly sourced from Saudi Arabia ($703.1 million), the United Arab Emirates ($548.5 million), the United Kingdom ($461.5 million), and the United States of America ($372.5 million), said the SBP in a statement.

Pakistan depends heavily on remittances as a source of non-debt-creating inflows for supporting its foreign exchange reserves. Although the SBP's reserves, which as of March 29 stood at $8.04 billion, are currently adequate to cover almost two months' worth of imports, they remain low and will not be able to meet anticipated external financing needs for at least the next few years.

With no immediate worries about the $1 billion Eurobond repayment slated for April 15, Pakistan's immediate financial outlook seems cautiously upbeat. However, concerns about the fiscal obligations due at the end of June persist.

To pay off billions of dollars in debt that is due this fiscal year, Pakistan intends to apply for a fresh, longer-term bailout loan from the IMF. The amount of additional cash Pakistan is requesting through a successor program has not been formally disclosed by the government, but media reports have indicated that Pakistan intends to request a new loan from the lender worth at least $6 billion.

In the final quarter of this fiscal year, the nation must repay $4.33 billion in debt, including $1 billion in Eurobonds.According to analysts, the nation is prepared to honor its pledge to pay back $1 billion on its dollar bond, which has a maturity date of mid-April.

After this $1 billion 2024 Bond repayment, the nation's foreign exchange reserves will decrease. Nonetheless, it is predicted that reserves will rise to $8 billion following the anticipated $1.1 billion IMF tranche, which is due to be received by the end of April.