KARACHI: Overseas Pakistanis remitted record $29.4 billion during 2020-21, helping the country meet its widening trade deficit and expected current account deficit in the last month of the just-ended fiscal year.
The central bank said that with inflows of around $2.7bn in June (9pc growth year-on-year) and 8pc (month-on-month), workers’ remittances continued their unprecedented streak of above $2bn for a record 13th consecutive month.
Data released by the State Bank of Pakistan (SBP) on Tuesday showed that remittances posted a 27 per cent year-on-year growth, which was the fastest rate of expansion since FY03.
This growth in remittances helped improve the country’s external sector position despite the challenging global economic conditions in the past year, said the State Bank, adding that the seasonal pre-Eid related inflows helped to further boost remittances level during June.
Remittances continue their unprecedented streak of above $2bn for 13th consecutive month
“Overall, record high inflows of workers’ remittances during FY21 have been driven by proactive policy measures by the government and SBP to incentivise the use of formal channels, curtailed cross-border travel in the face of Covid-19 infections, altruistic transfers to Pakistan amid the pandemic, and orderly foreign exchange market conditions,” said the SBP.
Analysts believe the widening trade deficit would not allow the country to end fiscal FY21 with current account surplus. The current account was surplus with $153m during 11MFY21. The trade deficit in the 11MFY21 was about $24bn, indicating that June would further widen the trade gap.
The highest inflows of $7.667bn in FY21 were from Saudi Arabia compared to $6.61bn in 2019-20, an increase of 16pc compared to 32.2pc growth in the preceding fiscal year.
The inflows from Saudi Arabia alone contributed 26.1pc to the total remittances in FY21. The rising remittances indicate that the Pakistanis workers in that country did not lose their jobs due to Covid-19 while an improved mechanism for transfer of remittances also facilitated this increase.
The SBP data showed that the second highest remittances came from the United Arab Emirates (UAE) in FY21 growing by 8.9pc to $6.114bn compared to $5.612bn in FY20 when inflows by 21.5pc.
The inflows from other GCC countries noted an inflow of $3.309bn while the growth was 13.7pc against the growth of 37pc in the preceding year.
The total inflows from the Middle East during the FY21 were $17.09bn accounting for 58.1pc of the total remittances sent by overseas Pakistanis during the year.
However, some other countries and regions have started appearing as important destinations for Pakistan as the remittances have noted record growth.
The growth in remittances from the UK and United States were highly encouraging for Pakistan. The inflows from UK noted a growth of 58.3pc against a decline of 24.7pc in the preceding year while the remittances from UK were the third largest in terms of amount as it reached $4.067bn. The remittances from the UK in FY20 were $2.569bn.
The inflows from the United States also were very significant as it jumped by 58pc to $2.756bn against a net decline of 47 per cent during the previous fiscal year. Both, the UK and USA were in strong grip of Covid19 during the previous fiscal which caused serious damages to their economies.
However, the inflows from EU countries remained strong like previous year. The remittances reached $2.709bn during FY21 compared to $1.778bn in the previous fiscal. The growth this year was 52.3pc while the same was 192pc in FY20 showing no negative impact of Covid-19 on remittances from EU countries.
Other emerging important destinations of remittances for Pakistan are Australia and Canada as the remittances from Australia during FY21 were $595 million (a growth of 75pc over last year) and $586m from Canada (87pc jump).
Published in Dawn, July 14th, 2021