KARACHI, Jan 17: Overseas Pakistanis sent back home $1.946 billion in the first half of this fiscal year, up from $1.874 billion they had sent in a year-ago period, according to data released by State Bank of Pakistan.

This suggests that remittances from expatriate Pakistanis may touch $4 billion during this fiscal year ending in June. But these remittances at $1.946 billion in the first half of the fiscal year are far below the trade deficit of $2.4 billion during this period, and all pointers indicate that the deficit may keep growing in the second half of the year as well.

As such, remittances from expatriate Pakistanis, the second largest source of foreign exchange earning for Pakistan, will be insufficient to meet the trade deficit in this fiscal year. Earlier, they used to do.

Provisional data released by the Federal Bureau of Statistics show that the trade deficit more than tripled to $2.409 billion in the first half of this fiscal year from $723 million in the last year.

As world oil prices as well as the demand for oil in Pakistan's progressing economy remain high and as imports of almost all categories including food items keep rising, indications are that the trade deficit may reach $4.8 billion, up against the initial target of $3 billion.

Against that, remittances from Pakistanis abroad seem set to cross $3.8 billion or even touch $4 billion. So, Pakistan will have to focus more on attracting foreign investment and raising commercial debts from the international market to reduce the impact of the more-than-estimated trade deficit on its overall balance of payments.

This is where the launching of Pakistan's Islamic bonds fit in. These bonds, or Sukuk, have already attracted $750 million response from the international investors but the country is yet to decide if it would accept all of them or go for the planned offering of $500 million plus.

Pakistan will likely issue another sovereign bond later this year to further supplement its foreign exchange earnings. Senior bankers say that inflow of remittances from overseas Pakistanis picked up in January as Eidul Azha is due to fall on 21st of this month.

They say that expatriates do send more of foreign exchange home during Eidul Azha every year. So the average remittances of $324 million seen in the first half of this fiscal year will rise in the second half of the year. But most of them agree that total remittances may remain within the range of $3.8bn-$4bn in this fiscal year. They say the stability in the exchange rates will also determine the extent to which workers' remittances may grow.

When the rupee remains stable in the inter-bank market and open market operators do not violate the rules laid down by the central bank, the gap between inter-bank and open market exchange rates remains below 50-60 paisa a dollar.

This level is considered vital by many bankers and executives of foreign exchange companies to attract more foreign exchange from overseas Pakistanis who are lured into sending money home through unofficial channels if the gap is higher.

Currently the gap between the official and open market exchange rates is well within the limit of 50-60 paisa a dollar, thanks to the steps taken by the State Bank to stabilize the rupee in the inter-bank market and check currency smuggling in the open market.

But as the rupee, that had shed 5.5 per cent value against the US dollar during July-October, recovered much of its lost value after the central bank started selling dollars to banks for financing oil imports, the rupee stability depends on how long the SBP continues to do this.