Remittances fall 8pc to $2.5bn in July

KARACHI: Remittances, a major source of foreign exchange in Pakistan, dropped 8 percent year-on-year to $2.5 billion in the first month of the current fiscal year, the central bank data showed on Tuesday.

The country received $2.7 billion in remittances from overseas Pakistanis in July 2021. The remittance flows also fell 9 percent month-on-month in July.

The decline in July remittances has surprised analysts as they were expecting Pakistanis living abroad would send more cash to their dependents back because of Eidul Azha festival.

Remittances rose to an all-time high of $31.2 billion in the fiscal year ended June 30, 2022. That compared with $29.4 billion in the previous year. These inflows stood at $2.8 billion in June. The State Bank of Pakistan (SBP) said remittances continued their record streak of above $2 billion for 26 consecutive months. The SBP attributed a slowdown in remittances to fewer working days because of the Eid holidays.

“This decrease largely reflected the lower number of working days in July as a result of Eid, at 17 working days compared to 22 last month and 18 in July 2021,” the central bank said in a statement.

“The daily average rate of remittances was 18 percent higher in July than in June.@

The SBP’s figures showed that most of the money sent to Pakistan in July came from Saudi Arabia ($580.6 million), followed by the United Arab Emirates ($456.2 million), the United Kingdom ($411.7 million), and the United States of America ($254.3 million).

The drop in remittances isn’t a healthy sign for Pakistan’s economy, which is struggling to stave off an economic crisis. Healthy remittance flows help beef up foreign exchange reserves, support the currency and finance the current account deficit. The foreign reserves held by the State Bank of Pakistan fell by $555 million to $7.83 billion as of August 5. These are enough to pay for 1.12 months of imports.

Analysts expect some slowdown in inflows in the current fiscal year.

“Growth in workers remittances is likely to post below average growth. We anticipate it to clock in at $32 billion in FY2023 versus $31 billion in FY2022 due to global economic slowdown and rise in global inflation,” said an analyst at Topline Securities in a recent report.

Remittances were on a rising trajectory in FY2022. The increasing use of formal channels for sending money home, and the introduction of digital apps for transferring funds due to limited air travel amid the pandemic in the later part of the FY2022 prompted the Pakistani diaspora to send more funds to the country. The government’s digitization initiatives and the incentives being provided to non-resident Pakistanis under Roshan Digital Account and Sohni Dharti remittance programme also contributed to the increase in remittances.