Remittances up 15.3pc to $1.8 billion in Feb

KARACHI: Workers’ remittances rose 15.3 percent year-on-year to $1.8 billion in February, carrying over an upward trend of the past period, the central bank’s data showed on Tuesday.

The State Bank of Pakistan’s (SBP) data showed that remittances, in value term, increased $242.6 million from $1.5 billion in the corresponding month a year earlier. In February, workers’ remittances fell 4.4 percent month-on-month or $83 million from $1.9 billion in January.

In February, larger amounts of workers' remittances were received from Saudi Arabia ($421.9 million), UAE ($387.1 million), USA ($333.5 million) and UK ($253.5 million), recording a decrease of 2.6 percent, 2.1 percent, 0.5 percent and 15.2 percent respectively as compared to January 2020.

Analysts are fearing continuity in downward trend ahead following oil fall that would upset middle east economies – the major source of foreign inflows in Pakistan. International oil price averaged $56 per barrel in the past one year, hurting commodity-dependent economies. The three-decade low oil drop on Monday compounded such fears. Though oil recovered, it is still sandwiched between oil producers’ battle and coronavirus outbreak.

Atif Zafar, chief economist at Topline Research agreed that lower oil prices are a net positive for Pakistan’s macros – especially the external account – as 26 percent of Pakistan’s imports are oil price driven.”

Zafar, however, sees a contraction impact of this on remittances and exports in the range of $2 to 3 billion. Rauf of Ismail Iqbal Securities argued against the possibility, reminiscing oil fall three years back that could not hurt remittance inflows. Crude oil price averaged $41 per barrel in the fiscal 2015/16, down 43 percent year-on-year, which led to 32 percent decline in petroleum imports.

“Surprisingly, remittances remained immune despite their link to oil prices as GCC (Gulf Cooperation Council) countries have major contribution in Pakistan’s remittances,” he added.

Workers' remittances received in July-February FY20 amounted to $15.1 billion recording an increase 5.4 percent or $770.7 million. That was compared with remittances $14.3 billion received in the corresponding period a year earlier. Robust remittances and foreign direct investment remained major sources of revitalising external account position of the country, backed by IMF’s reforms.

Last year, IMF agreed to lend $6 billion to Pakistan that faced an imminent balance of payment crisis. Under the three-year extended fund facility program, the country introduced macroeconomic adjustments to stabilise the economy that saw growth decelerate to 3.3 percent during the last fiscal year from 5.5 percent a year earlier.