As the remittances from overseas workers have started falling, reporting a massive drop of over 25% in previous month, the Federation of Pakistan Chambers of Commerce & Industry’s Businessmen Panel (BMP) has asked the government to take special initiatives and announce attractive package for overseas Pakistanis to enhance the volume of foreign inflows because this is the only hope which can support the country’s account balance.
FPCCI former president and BMP Chairman Mian Anjum Nisar observed that the development comes at a crucial time for Pakistan, which has seen its foreign exchange reserves deplete due to external debt servicing and lower inflow of dollars. According to the latest data, reserves held by SBP decreased another $366 million to $9.72 billion, with the level staying at less than 1.5 months of import cover.
Mian Anjum Nisar said that foreign remittances flows are crucial which can support the country’s account balance amidst low volumes of foreign direct investment and nominal growth of exports. He said that overseas Pakistanis living in Gulf and Saudi Arabia should further be motivated to maintain an upward momentum in remittances, as they contributed more than 60 percent of the total inflows during last couple of months.
He appreciated the SBP, which under its home remittances promotion measures, allowed Exchange Companies to maintain separate foreign currency accounts for each Money Transfer Operator. In February, the government had also decided to provide an incentive of Re1 for each US dollar of home remittances surrendered in the inter-bank market provided that the ECs surrender 100% of the foreign exchange received as inward home remittances, but more solid steps are needed to stop this massive fall, he added.
Mian Anjum Nisar referred to the World Bank report, which has projected a slowdown in remittances to Pakistan and estimated it to grow at 8% to $34 billion in 2022 compared to $31 billion in 2021, which grew at 20%.
The bank, in its report, stated that the remittance outlook for South Asia in 2023 is highly uncertain. While high-frequency data for all countries except India show growth in remittances slowing in South Asia, it is unlikely that the strong growth in remittances in South Asia in 2020 and 2021 can be sustained through 2023.
Referring to the data, he said that monthly remittances from overseas workers decreased 25.4% to $2.3 billion in May 2022 from a record high of $3.125 billion in April 2022. In terms of growth, remittances decreased by 25.4% on a month-on-month basis and 6.9% on year-on- year basis. On a monthly basis, the receipts were mainly sourced from Saudi Arabia ($542 million), United Arab Emirates ($435 million), United Kingdom ($354 million) and the United States of America ($233 million). Cumulatively, at $28.4 billion, remittances have grown by 6.3% year-on- year during the first 11 months of FY22.
During this period, expatriates in Saudi Arabia sent the largest amount at $7.06 billion. It was followed by UAE with net remittances of $5.33 billion. The receipts from UK amounted to $4.03 billion while overseas Pakistanis in US sent $2.79 billion during the 11 months. Similarly, receipts from Gulf Cooperation Council (GCC) countries other than UAE and Saudi Arabia stood at $3.29 billion. Net remittances from EU countries amounted to $3.07 billion during July 2021 to May 2022.
Mian Anjum Nisar said the drop in remittances is disappointing despite the fact that the State Bank of Pakistan has allowed exchange companies to start work on directly attracting worker remittances from the countries from where the inflows remain nominal. He said migrant cash flow, which is a lifeline for the country’s struggling current account deficit, is expected to weaken more in the coming months as the US economic slowdown and its trade war with China hits global economy.
The BMP chairman and FPCCI former president said that remittances could help in partly financing the deficit in import payments and foreign debt repayments. He suggested the government that structural reforms can revive Pakistan’s economic growth with major focus on incentives for overseas Pakistanis workers. If government supports overseas Pakistanis and provides them incentives, they can play a vital role in boosting Pakistan’s economy through their remittances and investments for high economic growth. If the falling trend persists in the remaining months of this fiscal year, it could pose serious problems for the economic managers as the govt heavily relies on remittances, which are much higher than the country’s total export proceeds.