KARACHI: Negative growth in remittances in the first eight months of 2016-17 seems alarming for the country, which is facing a declining trend in exports and little improvement in foreign direct investment (FDI).

The State Bank of Pakistan (SBP) reported on Friday remittances fell 2.5 per cent to $12.36 billion in July-Feb against the increase of 5.76pc a year ago.

Remittances from all important sources declined in July-Feb, which calls for the attention of economic managers.

The SBP report shows that remittances in February declined compared to January, which reflects the fact that inflows are shrinking each month. Oil-based economies in the Arab world have been facing a challenge for the last couple of years as oil prices still hover around $50 per barrel.

Saudi Arabia provides Pakistan with the biggest chunk of remittances, although inflows from the kingdom declined 6.8pc to $3.57bn in the eight months under review. In contrast, remittances from Saudi Arabia rose 7.8pc in the comparable period a year ago.

Saudi Arabia has tightened labour rules for overseas workers and is sending back people residing there illegally. It has adopted a policy to replace overseas workers with local people. As a result, only essential workers having no local replacement are going to keep their jobs.

It means Pakistan needs to review the export of skilled and non-skilled labourers to the kingdom as well as other Gulf countries.

The United States is the third biggest source of remittances for Pakistan, but inflows from the country have been declining each month. They fell 7.8pc to $1.51bn in July-Feb.

No policy change regarding Pakistan has been announced since Donald Trump’s election as US president. Experts believe any policy change can hurt remittances from the United States.

Another important source of remittances for Pakistan is the United Kingdom. Inflows from the UK declined 9.9pc, which is the biggest year-on-year decline recorded by remittances originating from any country. Inflows from the UK fell to $1.44bn in the first eight months of 2016-17.

Remittances from the United Arab Emirates decreased 1.6pc to $2.76bn in July-Feb. The country is the second biggest contributor to Pakistan’s remittances.

Remittances from European countries showed positive growth as inflows increased 13pc to $293m in July-Feb. Remittances are getting more important for Pakistan because exports have been declining while FDI shows no significant improvement.

Published in Dawn, March 11th, 2017