KARACHI: The growth in remittances decelerated to 12.1 per cent in the calendar year 2015 from 17.9pc in 2014, which may further fall due to a massive decline in oil prices, said a State Bank report on Thursday.

“The recent dip in oil prices, if continues, may impact the inflow of remittances coming from the oil exporting countries,” said the report.

The oil exporting countries have started taking cost-cutting measures and some have approached the international donors for budgetary support. There is a fear among developing like Pakistan that the oil producing countries could slash jobs and Pakistan could face the consequences of reduced remittances.

Currently Pakistan is expecting to receive about $19bn remittances for the financial year 2016 that closed on June 30.

The State Bank suggested that in order to better negotiate the future contingency on external front, dependent sources of foreign exchange inflows (exports, FDI, etc) are needed.

The report said that exports of Pakistan are consistently on the declining path (export growth in CY2015: negative 8.2pc, CY2014: negative 1.2pc).

The economic slowdown in China (one of Pakistan’s major trading partner) and devaluation of the euro have made an adverse impact on exports of many emerging countries, including Pakistan. The consistent appreciation in real effective exchange rate over the last couple of years may also have impacted the export competitiveness, said the report.

Though domestic currency recorded depreciation against dollar by 4.2pc during CY2015 (mostly in the second half of CY2015), this was synchronised with accelerating exchange rate depreciation in many emerging economies against US dollar.

“The capital flight from emerging markets in search for yield since US announced “tapering of quantitative easing” had started to build pressure on the currencies of these economies,” said the report.

In August 2015, China devalued yuan by 3pc in order to gain export competitiveness. China observed negative growth in its exports during July 2015.

With the addition of $5.5bn during CY2015 (almost entirely in SBP), the liquid foreign exchange reserves of the country touched unprecedented $20.8bn as of end December 2015, said the report.

“Already low Foreign Direct Investment (FDI) in CY2014 dropped further in CY2015. The FDI decline in Pakistan was much higher than the global trend,” said the report.

Published in Dawn, July 1st, 2016