Overseas Pakistanis – a large majority of them are living in the UAE and Saudi Arabia – sent all-time record home remittances topping $19.9 billion, or 6.38 per cent higher than the government’s target for fiscal 2016.
The government of Pakistan set a target of $19 billion in FY-2016. The value of remittances in FY-15 was $18.72 billion, State Bank of Pakistan (SBP), the central bank, reported over the weekend.
The remittance forecast for FY-17 is 10 per cent higher than the actual amount received in FY-16. Saudi Arabia and the UAE are expected to stay as lead remitters, followed by the UK and other GCC countries, the SBP spokesman said.
“However, the inflow from the US declined by 6.65 per cent. Analysts said this was attributable to difficulties faced by money transfer operators due to stringent regulations governing remittance transfers,” the spokesman said.
According to the SBP spokesman, on a full-year basis, in FY-16 Saudi Arabia contributed 30 per cent of total remittances amounting to $6 billion, compared to $5.6 billion in FY-15. Remittances from the UAE rose to $4.36 billion. The amount received from the UK was $2.57 billion – up eight per cent as compared to FY-15. The remittances from the US declined 6.6 per cent to $2.52 billion.
The remittance boom has helped Pakistan meets its forex needs comfortably. The significance of the remittance inflow is manifold as these form a key component of the balance of payments in a forex-short country, which has to watch out its foreign exchange reserves and foreign trade at all times. It is also significant because the record-high inflow of remittances took place at a time when low international oil and commodity prices have forced many countries to reduce their development funding and cut down employment of foreign workers.
The SBP in its report indicates multiple factors which affected global remittances.
These factors, according to SBP, include “virtually stagnant growth and low inflation in the developed world, the drastic nature of oil prices and a tightening regulatory landscape governing cross-border money transfers in the US, which has increased compliance costs for banks and money transfer operators, and the migrant crisis in the European Union.”
Financial market analysts and economists have cheered the larger inflow of remittances despite the fact that the subsidy allowed on the remittance business was reduced from July 1, 2015 when the government had decided to slash the actual subsidy from the then prevailing SR25 for each remittance transaction to SR20. It had also increased the minimum transaction amount to qualify for the rebate to $200, or its equivalent in other currencies, from $100.
What are the government’s future plans and the manpower export policy and prospects?
An official spokesman said: “The government is considering different proposals to substantially boost foreign remittances and foreign exchange reserves. The Gulf region is to be effectively tapped by exporting the maximum manpower. The government is expecting good opportunities of manpower export during Expo 2020 in Dubai. Moreover, massive new construction plans in Saudi Arabia will also provide opportunities for Pakistani manpower export. Like other Gulf countries, Qatar stands prominently in offering a number of incentives to Pakistan. Qatar is going to host Fifa World Cup in 2022 and has created a huge budget for this purpose. Qatar will require substantial infrastructure development where Pakistani engineers and workers are expected to find employment opportunities, which will support the inflow of remittances into Pakistan.”