Remittance Inflows to Pakistan Set to Resume Upward Trend

Remittance inflows to Pakistan are expected to resume an upward trend during the current financial year and likely to cross $28 billion on positive economic indicators of the country.

More than nine million overseas Pakistanis remitted $18.083 billion during the first eight months of fiscal year 2023-24 compared to $18.308 billion in the corresponding period last year, reflecting a year-on-year decline of 1.2 per cent.

The remittance inflows in February 2025 registered a 13 per cent growth to $2.25 billion from $1.99 billion in the same month last year, according to data released by the State Bank of Pakistan (SBP) — the country's central bank.

Remittances inflows during February 2024 were mainly sourced from Saudi Arabia ($539.8 million), UAE ($384.7 million), United Kingdom ($346.0 million) and United States of America ($287.4 million). Overseas Pakistanis residing in Europe and other GCC countries also remitted $245.4 million and $241.7 million in February 2024.

Pakistan received $27 billion in remittances in the 2022-23 fiscal year, down 13.6 per cent from a year ago even though more Pakistani workers have moved abroad. The overseas Pakistani workers’ remittances grew 6.1 per cent in fiscal year 2021-22 to all-time high $31.2 billion against the inflows of $29.45 billion in the same period of the preceding year.

Remittances play a significant role in Pakistan's economy, with billions of dollars flowing into the country annually from Pakistanis working abroad. These remittances are a crucial source of foreign exchange, helping to stabilize the country's balance of payments and supporting the Pakistani rupee.

The impact of remittances on the economy is multifaceted. They help to alleviate poverty by providing households with additional income, which can be used for consumption, savings, or investment. Remittances also contribute to the overall economic growth of the country by boosting consumption and investment levels.

Resuming upward trend

The country is expected to receive up to $28 billion remittances during financial year 2023-24 ending on June 30, considering the inflows average around $2.5 billion in each of the remaining four months. It received $2.26 billion remittances on average in the July-February 2024 so far.

In January, SBP Governor Jameel Ahmed had anticipated that remittances would grow in the second half (January-June) of the fiscal year 2023-24, following the announcement of incentives aimed at attracting higher remittances.

Additionally, the outlook for the global economy has improved in recent months, supporting non-resident Pakistanis in earning and sending more money back home.

He projected that remittance receipts would increase to $28 billion for the full fiscal year 2023-24, compared to $27 billion in the previous fiscal year 2022-23.

Central bank data suggests that remittance inflows have been comparatively higher in each of the last four months (Oct-Jan) compared to the same months in the previous year.

UAE, Saudi lead

Overseas Pakistanis residing in the Saudi Arabia and the UAE continued to dominate on remittances table with $4.38 billion and $3.12 billion inflows, respectively, during the July-February 2024 period while the non-resident workers in UK and the US remitted $2.69 billion and $2.15 billion, respectively.

The non-resident Pakistanis in other Gulf countries also remitted precious foreign exchange to the country despite economic challenges. The workers’ remittance inflows from Oman, Qatar and Kuwait reached at $631.9 million, $567 million and $499.9 million, respectively, during the first eight months of 2023-24. Overseas Pakistanis in Bahrain also remitted $275.2 million during this period.

Analysts and bankers are anticipated steady increase in remittance inflows on account of the holy month of Ramadan and Eid festivities as non-resident Pakistanis used to remit higher money back home for zakat, sadqa and Eid celebrations in addition to regular amount to their families.

“I agree that the salvation of the external balance stability is in enhanced exports that are restrained by stagnant external factors and expensive energy inputs as well as rising cost of doing business in Pakistan. Therefore, the only salvation is booing remittances from abroad,” Dr Qais Aslam, Professor of Economics at Lahore-based University of Central Punjab, told Khaleej Times.

“There are almost $ 50 billion to be tapped. Currently remittances have shrunk to $ 27 billion. An incentive backed approach is needed to attract these much needed funds through official channels.

Hope the new government has sensibility enough to tap the untapped money making sectors of the economy on modern 21st century mind-frame,” he added.

Economists said remittances have a positive effect on financial inclusion in Pakistan. Many remittance recipients do not have access to formal banking services, so the increased use of digital financial services to receive remittances has helped to expand financial inclusion in the country. This has the potential to strengthen the financial system and promote economic development.

Overall, remittances are a vital lifeline for many households in Pakistan and play an essential role in the country's economy. It is essential for policymakers to continue to support policies that promote the flow of remittances and ensure that they are used effectively to support inclusive economic growth.

Roshan Digital Account Inflows to pick up

Foreign exchange inflows through the Roshan Digital Accounts (RDAs) are expected to pick up in coming months as the new government accords top priority to stablise economy and attract overseas Pakistanis to invest in the country.

The RDAs, which experienced a slip decline in February to $141 million from $142 million in January, will attract non-resident Pakistanis in a wide range of products and saving instruments.

“The total RDA funds received by the end of February 2024 reached at $7.478 billion compared to $7.337 billion in January. Of this, $1.55 billion has been repatriated, while $4.66 billion has been utilised locally, resulting in a net repatriable liability of $1.25 billion,” according to the State Bank of Pakistan.

In February, funds worth $9 million were repatriated and $11 million utilized locally. The net repatriable liability in February stood at $21 million, the central bank data shows.

As per data, 668,701 RDAs have been opened since they were launched, reflecting a 1.34 per cent increase on a month-on-month basis.

Out of the total outstanding liability, an amount of $805 million is with Naya Pakistan Certificates (NPC), with $304 million in conventional NPCs and $501 million in Islamic instruments. Similarly, an amount of $392 million is ‘balances in accounts’, the SBP showed. Meanwhile, Roshan Equity Investments improved monthly and stood at a meagre $32 million.

Roshan Digital Account is a major initiative of State Bank of Pakistan. It was launched in September 2020 in collaboration with commercial banks operating in Pakistan. These accounts provide innovative banking solutions for millions of Non Resident Pakistanis (NRPs), including Non-Resident Pakistan Origin Card (POC) holders, seeking to undertake banking, payment and investment activities in Pakistan.

— muzaffarrizvi@khaleejtimes.com

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