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What’s behind the jump in remittances?

Updated August 13, 2018

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Pakistanis living in the United States and the United Kingdom sent back about 45 per cent and 39pc more foreign exchange, respectively, in July than a year ago. Those working in the United Arab Emirates also repatriated 29pc more.

This led to a record 25pc annual increase in total home remittances that soared close to $1.93 billion in July from $1.54bn a year ago. It’s good news at a time when the country is struggling on the external front.

Asad Umar, widely tipped to be our next finance minister, has already said the PTI government will focus on growing home remittances to supplement foreign exchange inflows. Analysts are anticipating that the new government will come up with some kind of incentives for overseas Pakistanis to send more foreign exchange back home through official channels. Besides, Mr Umar has hinted that dollar bonds for the Pakistani diaspora could also be launched. So the nation can expect more good news from the home remittances front in the near future.

The big increase in remittances from the three countries cannot be attributed to specific things unless one has access to the breakdown of data. But a weaker rupee, Eidul Azha factor and pre-election financing of political parties by their supporters in these countries could have been behind it.

Eidul Azha is due in the third week of August, but bankers say it is common for overseas Pakistanis to start sending more foreign exchange back home even five to six weeks ahead of this occasion

The rupee had shed 5.3pc in mid-July, or just nine days ahead of the elections on July 25. Although it did recover a large part of its lost value by the close of the month, people availing the tax amnesty scheme during those nine days could have used home remittances to whiten part of their undeclared foreign wealth that they didn’t want to declare under the scheme. Bankers say this makes sense as the scheme’s deadline was July 31 and the caretaker government had made it clear that it would not be extended.

As for political financing from overseas Pakistanis, all three major parties – the Pakistan Tehreek-i-Insaf (PTI), PML-N and PPP – enjoy enough support in varying degrees among Pakistanis living in the United States, United Kingdom and UAE. And given the ferocity of the fight between the PTI and the PML-N, it seems logical for their party networks in these countries to have mobilised financial support from amongst Pakistani nationals.

Influential quarters in these countries take enough interest in our electoral politics for their own reasons. They also have the ability to encourage the dispatch of larger-than-usual remittances to Pakistan by influencing and encouraging Pakistanis living there.

Eidul Azha is due in the third week of August, but bankers say that it is not uncommon among overseas Pakistanis to start sending more foreign exchange back home even five to six weeks ahead of this occasion.

This is truer in the case of those overseas Pakistanis that donate money to seminaries or charities for sacrificing animals in their names or in the names of their loved ones. For some years, a class of urban-rural investment hoppers/occasional businessmen has become very active in mobilising money from overseas Pakistanis in their animal buying/selling business as temporary investment.

Home remittances in August are expected to remain stronger due to the Eidul Azha factor as well as in anticipation of some incentive package to be announced for overseas Pakistanis by the PTI government.

Published in Dawn, The Business and Finance Weekly, August 13th, 2018