KARACHI: The inflow of dollars from foreign countries rose 15 per cent in the first two days of Ramazan, according to a foreign exchange dealer.

This suggests the country may achieve the last fiscal year’s level of remittances by the end of 2016-17.

Traditionally, monthly remittances more than double in Ramazan every year. Inflows increase because overseas Pakistanis send charity and Zakat funds in the holy month. In addition, overseas Pakistanis also increase remittances ahead of Eid.

“Our data shows remittances in the first two days of Ramazan have increased 15pc. This means more remittances can be expected in coming days and weeks,” said Malik Bostan, president of the Forex Association of Pakistan. He said exact figures will be released a few days later.

Remittances are the backbone of the economy. They have helped the government meet the trade deficit for more than a decade. But the inflows started declining recently while the trade deficit also widened to a record high.

Exchange companies said the currency market remained dull and no big deal was made on Tuesday. There were few buyers of dollars while the number of sellers was also negligible.

There was demand for the Saudi riyal as pilgrims are leaving in growing numbers for Saudi Arabia for Umrah.

The greenback slipped 15 to 20 paisas on Tuesday. Currency dealers believe demand for the dollar can fall further.

“Compared to Lahore and a few other parts of Pakistan, the dollar is already costlier in Karachi by up to 50 paisas,” said Mr Bostan, adding that higher remittances can ease dollar prices.

The external account may deteriorate further because the trade gap, which was about $26bn in July-April, has already created a current account deficit of over $7.3bn.

Pakistan received remittances of $15.8bn in July-April, which can reach $18.5bn by the end of 2016-17. However, Ramazan-related inflows can push the figure up to $19bn, close to the inflows of $19.5bn recorded in the preceding fiscal year.

The economy relies increasingly on remittances as foreign exchange reserves have been depleting rapidly. The unexpectedly high trade deficit along with a declining trend in exports has hindered the government’s attempt to stabilise the economy.

Currency experts said low reserves will directly hit the exchange rate. The State Bank of Pakistan has been intervening in the interbank market to maintain the rate around Rs104.85.

Published in Dawn, May 31st, 2017