Remittances rise by over 10pc to $30.3bn in FY24

KARACHI: Remittances sent by Pakistani citizens working abroad saw a notable increase of 10.7 per cent during the fiscal year that ended on June 30, as per data released by the central bank on Tuesday.

This boost has been attributed to a shift towards official money transfer channels, increased Pakistani immigrants in other countries, and the country’s stable currency.Pakistan received $30.3 billion in remittances from abroad in July-June FY24, compared with $27.3 billion in the previous year.

Remittances for the entire year FY24 came close to the government’s $30.3 billion target exceeding the State Bank of Pakistan’s projection of $25.5-26.5 billion.In June, workers’ remittances reached $3.2 billion, marking a 44.4 per cent increase from the $2.2 billion received in the same month last year. However, there was a 2.6 per cent decrease in inflows compared with the previous month.

The surge in June remittances matched analysts’ predictions, as these inflows tend to rise during the Eid season. This meant Pakistani expatriates sent significant amounts of money to their families to purchase sacrificial animals for Eidul Azha, which fell on June 17th.

Remittances from abroad are a major source of funding for Pakistan’s external account, boosting the nation’s economic activity and augmenting the disposable incomes of households that depend on them for their livelihood.

Remittances from Saudi Arabia, Pakistan’s biggest source of these funds, rose 14 percent to $7.24 billion in FY24, according to SBP data. Remittances from Pakistanis working abroad in the United Arab Emirates totalled $5.535 billion in the last fiscal year, a 19 per cent increase over the previous year. Remittances from the United Kingdom to the nation totalled $4.522 billion, up 11 per cent from FY23.

“In FY24 remittances increased due to diversion of flows to the official channel after the closure of hawala/hundi and informal currency markets,” said Awais Ashraf, the director research at AKD Securities Limited.

“Narrowing the spread between open and interbank rates to 1-3 per cent against more than 10 per cent during last yearalso played an important role,” Ashraf added.The rupee strengthened against the dollar in FY24 after a three-year hiatus thanks to a decrease in the current account deficit, improved foreign inflows, a narrowing of the difference between open and interbank rates, and administrative measures like a crackdown on illegal dollar trade, foreign currency hoarders, and hawala/hundi operators. In the last fiscal year, the rupee appreciated by 2.8 per cent against the US dollar.

Pakistan secured a $3 billion bailout from the IMF last summer to prevent a sovereign default. The IMF’s stand-by arrangement ended in April this year. Pakistan was able to obtain timely funding from both bilateral and multilateral partners due to the IMF’s programme. Additionally, a controlled current account deficit amid subdued domestic demand contributed to reduced imports and exchange rate reforms attracting remittances back to the official banking system.

“We believe YoY growth in remittances will remain stronger in coming months in anticipation of currency stability led by expectations of new IMF programme,” said Topline Securities in a note.According to World Bank research that was published last month, poor economic conditions in Pakistan during the calendar year 2023 --- including a balance of payments crisis and other challenges -- caused remittance inflows to decline by 12 per cent to $27 billion when compared to the same period the year before.

According to the analysis, there is a possibility that a considerable portion of remittances to Pakistan came through informal channels in 2023, which resulted in a decline in formal remittances, given the favourable labour market circumstances in the recipient nations.

The World Bank anticipates that remittances to Pakistan will, nevertheless, pick up and expand at a rate of roughly 7.0 per cent to $28 billion in 2024 and a further 4.0 per cent to almost $30 billion in 2025.