KARACHI: Pakistan received $14 billion remittances in the first nine months of the current fiscal year, down 2.3 per cent year-on-year.

According to data released by the State Bank of Pakistan (SBP) on Monday, inflows from most major sources of remittances did not improve in July-March. Remittances from countries of the European Union grew, but their share in total remittances was small.

With a rising current account deficit that jumped to $5.5bn in July-Feb against $2.5bn a year ago, Pakistan has been struggling to maintain its foreign exchange reserves.

In the wake of a continued decline in exports and widening trade deficit led by a sharp increase in imports, remittances have become critically important for the country’s external sector.

Pakistan received $4.078bn in July-March from Saudi Arabia, down 6.2pc year-on-year against 7.5pc growth recorded over the preceding fiscal year.

Similarly, remittances from the United States and United Kingdom also fell 6.9pc and 8.5pc, respectively. Inflows from the two countries were $1.858bn and $1.807bn, respectively.

About $3.124bn was received from the United Arab Emirates, showing a decline of 2.5pc.

Reserves of the SBP are in decline, forcing the government to borrow from foreign lenders to keep the exchange rate stable.

According to 2016-17 budgetary estimates, the government is going to raise $1.75bn through euro bonds and sukuk in addition to $2bn from commercial borrowings. During the first half of 2016-17, the government issued sukuk worth $1bn and raised $900 million in gross commercial loans.

Foreign investment has not yet shown any significant growth despite the government’s claims to the contrary. The country received $127.7m in November 2016 when a Turkish firm acquired a privately held Pakistani home appliances company. In December, a Dutch food conglomerate completed its purchase of a majority stake in a Pakistani food-processing company for $458m.

A higher oil import bill is widening the trade deficit. A recent report by the SBP showed that from the first quarter of 2014-15 to the first quarter 2016-17, the cumulative decline in the country’s oil payments amounted to $7.3bn.

This decline was almost entirely driven by the dramatic fall in oil prices as the import quantity of petroleum products has increased during the same period.

This provided the country with room to finance the rising non-oil imports, including that of power generation and construction-related machinery for CPEC projects, without exerting any pressure on the external account.

But with oil payments rising in the second quarter of 2016-17, the overall import bill swelled 11.5pc to $11.2bn for the three-month period.

Published in Dawn, April 11th, 2017