Remittances rise 34pc to $2.5bln in May

KARACHI: Remittances by overseas Pakistanis increased 34 percent year-on-year to $2.5 billion in May, staying above the $2 billion mark for a year, the central bank’s data showed on Thursday.

However, the remittances fell 10.4 percent in May from April “This fall was expected as remittances usually slow in the post Eid-ul-Fitr period,” the State Bank of Pakistan (SBP) said in a statement. As Eid fell in mid-May with markets closed a week earlier, there was some front-loading of remittances in April, it said. The usual post-Eid monthly dip was much smaller this year.

The seasonal decline in May less than half the average decline observed during FY2016-2019. In FY2020, remittances experienced an exceptional rise due to the easing of COVID lockdowns in the post-Eid period in Gulf countries, said the SBP.

Remittances climbed to an all-time high in 11 months of this fiscal year. Remittances surged 29.4 percent to $26.7 billion in July-May FY2021. These inflows during the first eleven months of FY2021 have already crossed the full FY2020 level by $3.6 billion.

Most remittance inflows came from Saudi Arabia, United Arab Emirates (UAE), United Kingdom (UK) and the United States (US). Remittances sourced from Saudi Arabia rose 19.5 percent to $7 billion in July-May FY2021.

From UAE, remittances increased 9.7 percent $5.6 billion. Pakistan received $3.7 billion in remittances from the UK in 11 months compared with $2.2 billion in the same period of last fiscal year.

Remittances from the U.S. increased 58 percent to $2.5 billion.

Record high inflows of workers’ remittances were driven by policy measures by the government and SBP to incentivise the use of formal channels, curtailed cross-border travel in the face of COVID-19, altruistic transfers to Pakistan amid the pandemic, and orderly foreign exchange market conditions, the SBP said.

Global air travel was far below the comparable 2019 levels, and therefore emigrants are likely to have continued to utilize the banking channels to support their families back home. Within Pakistan, policy measures undertaken by the government and the SBP to encourage inflows through formal means also contributed to the growth in remittances. Furthermore, continued policy support in the host destinations (especially the advanced economies) via unemployment benefits, rent and loan deferrals, and direct cash handouts, likely increased the ability of migrants to remit higher amounts back home. Also, the efforts by global money transfer operators and governments to incentivize migrants to adopt digital channels to remit funds have likely also played a role in pushing up inflows received via the banking system.

In Pakistan also, banks are being incentivised to introduce digital products to facilitate migrants in sending remittances under the Pakistan Remittance Initiative. Data shows that transaction volumes and amounts of international remittance transactions in Pakistan via the branchless banking mode (m-wallets) have grown quite strongly since the Covid-19 outbreak. Remittance flows are expected to remain strong on the back of continued surge in inflows across all the major corridors and the welcome turnaround in the trend of Pakistanis going abroad for work.