Remittances soar 36.5pc to record monthly high of $2.768bln in July

The News/Erum Zaidi

KARACHI: Remittances surged 36.5 percent year-on-year to hit the hig hest level for a single month in July, central bank data showed on Monday, as workers sent more money home through formal channels, while reduced spending on Hajj amid the coronavirus pandemic also helped increase inflows.

“More good news for Pakistan economy,” Prime Minister Imran Khan tweeted. “Remittances from overseas Pakistanis reached $2,768 million in July 2020, highest ever amount in one month in the history of Pakistan.”

Overseas Pakistanis remitted $2.768 billion in July 2020, the highest amount ever in a single month, showing an increase of 36.5 percent, from $2.027 billion in July 2019. The month-on-month increase was 12.2 percent. The country received $2.466 billion in June 2020.

Most of the money came from Saudi Arabia with $821.6 million followed by the United Arab Emirates ($538.2 million), the United Kingdom (393.9 million), and the United States ($250.6 million).

Analysts unanimously attribute this jump in remittances to money being sent via legal sources. Saad Hashemy, an executive director at BMA Capital, said loss of jobs could be leading to higher “one-time repatriation of cash,” adding that this trend if continued, could be a good development for the economy.

Economist Muzammil Aslam said the primary reason behind this massive increase in remittances was that a lot of people, who travelled during the month of Zilhaj to Pakistan to celebrate Eid, did not do so. Instead, they instead sent money through banking channels to their families.

“Other than that the State Bank of Pakistan (SBP) has been very aggressive to bring more remittances from official channels, which is why we have seen there has been a massive increase from other countries apart from Saudi Arabia and the UAE,” Aslam said.

Going forward, he said though things would be challenging “the government can sustain this level of remittances.” The SBP said given the impact of COVID-19 globally, the increase in worker’s remittances was encouraging.

“The growth rate in remittances compared to the same month in the previous year is around twice as high as the Eid-ul-Azha related seasonality typically experienced over the last decade,” the central bank said in a statement.

Several factors have likely supported the growth in remittances to date, including orderly exchange rate conditions and policy steps taken by the central bank and the federal government under the Pakistan Remittance Initiative, the SBP said.

“These steps include reducing the threshold for eligible transactions from USD 200 to USD 100 under the Reimbursement of Telegraphic Transfer (TT) Charges Scheme, an increased push towards adoption of digital channels, and targeted marketing campaigns to promote formal channels for sending remittances.”

Remittances to Pakistan are projected to decline sharply this fiscal year due to the fall in employment in the largest remittance sending countries for Pakistan in the Middle East due to the pandemic.

However, remittances have proved robust since the start of the coronavirus crisis. During the March-June 2020 pandemic period, remittances rose 7.8 percent. Remittance flows hit a record high of $23.120 billion in the last fiscal year that ended on June 30, 2020.

A senior banker said the uptrend in remittances could be attributed to the recovery in global economic activity complemented by relaxation of global lockdown. As countries switch from complete lockdowns to smart lockdowns, economic activity is expected to revive, which in turn would likely mean a rebound in remittances. “As far as long-term projections are concerned that is still not clear as the economic situation keeps on changing and it is hard to predict the future outcome,” the banker said.

On average, 2,500-3,000 workers were going abroad from Pakistan on job visas, but flight closures over the last four months has completely halted the export of manpower. This was a major hit for Pakistan and a matter of serious concern, the banker said.

“Further majority of our workers are in the Middle East hence our dependence on remittances inflow is mainly on Saudi Arabia, UAE and GCC so any negative economic effect on these economies will result in a major blow for us. Right now there is no massive lay off and I hope it will continue,” the banker added.