KARACHI, Jan 13: Overseas Pakistani workers sent record remittances in December helping the country to minimise its trade and current account deficits.

The State Bank on Tuesday reported an inflow of $673.5 million in December 2008, setting a new record of highest inflow in a month. Last record was of $660.35 million in September 2008.

The inflow of December was 40.5 per cent higher than the inflow during the same month of last year. In December 2007, the country received $479.26 million.

The half year (July-Dec 2008) inflows of remittances were 19 per cent higher than the corresponding period of last year, encouraging the market to improve their trust on strength of the rupee.

“The inflow of remittances is one of the key reasons for strengthening of rupee-dollar parity which now looks settled around Rs79.80 per dollar after a massive depreciation of rupee by 23 per cent during 2008,” said Atif Ahmed, a currency dealer. During the last six months, the country received $3.640 billion against $3.066 billion of the six months of the preceding year. The monthly average during this period reached $606.67 million which was 18.7 per cent higher than the average of six months of previous year.

The country’s reserves once again went up to touch the mark of $10 billion last week, giving hope that the rupee would not see depreciation any more, however, the weak economic indicators could create some more space for deprecation.

“The 23 per cent inflation is a sign of weakening of currency as purchasing power of the local currency is shrinking further that could lead to more depreciation of rupee,” said the currency expert.

The inflation is slowly easing off but still much higher to remove the fear of further rupee depreciation. Currency dealers said the exchange rate is stable and looks stable in near future.

“If no extra-ordinary incident appears on the horizon of economy, the exchange rate could remain almost same but rupee will not recover what it lost during the last year,” said an analyst of a brokerage house.

The currency dealers expect that the cumulative inflows of remittances could touch a figure of $7 billion at the end of the current fiscal in June 2009.

The sharp decline of oil and commodity prices also provided room for saving of reserves while the IMF’s $3.1 billion stabilised the market sentiment.

The vulnerable exchange rate badly hit the economy during the calendar year 2008 and panic-like situation gripped the entire economy resulting in huge outflow of capital from the country. The outflow also accelerated the dollar demand in the country which helped illegal outflow of foreign currency.

The government arrested some top currency dealers accusing them of illegal transfer of currency from the country.

“Now the economic situation in Dubai and developed economies of the west is not attractive for capital outflow and this is the reason that capital outflow from the country came to a halt,” said the analyst.