KARACHI: Savings on the back of cheaper oil imports and remittances from overseas Pakistanis helped the government net $18.1 billion during the first nine months (July-March) of this fiscal year, outweighing the collective deficits of trade and current account, and external debt servicing by almost $1.4bn.

While remittances came in at $14.4bn during July-March FY16, the import bill stood lower by $3.7bn during the period compared to a year earlier.

The huge inflows have somewhat eclipsed the government’s failure on many fronts, for instance its failure to make any significant improvement in foreign investments.

During the nine-month period under review, the biggest hit came from the poor performance of the exports sector while imports could also not be limited; this created a trade gap of $13.188bn, a large amount for a country depending mainly on borrowing to keep its reserves at a level acceptable internationally for trade deals and borrowing from global markets.

Analysts fear the situation may not last much longer

The government borrowed billions of dollars from the international market by issuing Eurobond and sukuk (Islamic bonds). But all this money came at a price — the government had to offer very high returns on these papers which exposed the weak external fronts of the economy.

Moreover, the country is still facing a current account deficit of $1.6bn despite record-high remittances and savings through cheaper oil imports. Besides, the country paid $1.939bn as external debt servicing during the first half of this fiscal year, according to the State Bank of Pakistan.

Analysts in their reports indicate that both the factors of oil price and remittances could see a vital change in the next two years. If the oil price goes higher, Pakistan would need more dollars to pay the bills. But if the price remains flat, which seems more likely due to massive oil production by the United States and lifting of international sanctions on Iran, the oil-producing countries would need to revamp their economies which may cost expatriate workers their jobs and that will ultimately hurt remittances.

Simply put, Pakistan may not get the best of both worlds in the long run as savings on oil imports and rise in remittances can’t go hand in hand for too long.

Pakistan receives the largest amount of remittances from Saudi Arabia which has now decided to borrow $10bn to keep its economy afloat. In the preceding fiscal year, Pakistan received $5.6bn, or 30pc of the entire remittances of $18.7bn, from the kingdom.

Saudi Arabia recently decided to expel foreigners within six months to create millions of low-level jobs for Saudis. Pakistanis are bound to bear the snowball effect of this decision, and it will ultimately hit the size of remittances.

The government has yet to develop a strategy for dealing with this issue.

Published in Dawn, May 8th, 2016