Almost all this growth in remittances during February over the corresponding period of the last fiscal year was through banking channels, said the State Bank. - File photo

KARACHI: Remittances sent by overseas Pakistanis surged by 23 per cent in the first eight months of the current fiscal year. The Gulf states appeared to be the real booster of this flow of much needed foreign exchange to Pakistan which accounted for 60 per cent of the entire remittances.

The State Bank reported on Friday that the country received a total of $8.592 billion during this period which was 23 per cent ($1.629) higher than the eight months of the previous fiscal year.

The ever-increasing remittances being sent by the overseas Pakistanis are working miracles with economy, and helping the country remain within a manageable size of the current account deficit.

While the external fronts of the economy awaiting serious consequences of halt of foreign inflows from IMF and other donors, the rising petroleum prices is eating up the already falling foreign exchange reserves of the country.

Remittances from Arab countries are rising and accounted for 60.5 per cent of the entire remittances. A total of $5.197 billion were received from Saudi Arabia, UAE and GCC states during this period, up by $1.187 billion compared to eight months of previous year.

According to analysts higher remittances may make a little impact in the wake of increasing oil prices as oil import may eat up over $12 billion.

This may also create a serious imbalance in trade and erode foreign exchange reserves, currently enough for four to five months imports only, they said.

Average monthly inflow of remittances rose to $1.074 billion during the eight months, and it is hoped that the country might receive $12 or $13 billion by the end of the current fiscal year.

However, as trade deficit of seven months reached $9.057 billion, it is giving signals that even very high remittances would not be able to bring the current account deficit within a manageable range.

During entire 2010-11, trade deficit was $10.5 billion. If this negative trend of trade deficit persists for the remaining five months, the total could reach over $13 to $14 billion, which may worsen the current account deficit.

In the first seven months of the current fiscal year, the current account deficit stood at $2.633 billion and there may be a sharp increase in it in the wake of rising oil prices.

The State Bank report showed that remittances from Western countries are either falling or are stagnant.

In February, $1.156 billion were sent home by overseas Pakistanis, up 37 per cent, when compared with $845 million received in the same month of February, 2011.

Almost all this growth in remittances during February over the corresponding period of the last fiscal year was through banking channels, said the State Bank.