Tag: remittances

  • Brain drain to wallet gain: Remittances expected to hit 34 billion dollars

    Brain drain to wallet gain: Remittances expected to hit 34 billion dollars

    Businesses watch with great pleasure as the endless inflow of remittances hits a four-month high. With the monthly remittance figure crossing $3 billion, there will be significant positive implications for both businesses and the economy as a whole.

    This remittance rush was to be expected, though, as over two million Pakistani citizens emigrated out of Pakistan in the past three years to seek better employment opportunities.

    The concept of brain drain – migration of skilled and educated people to other countries for better opportunities – is perceived to be a negative thing.

    For a country like Pakistan, however, it is also a blessing in disguise.

    The inflow of foreign reserves keeps the economy afloat by reducing Pakistan’s current account deficit. With Islamabad’s persistent efforts, the current account deficit sits at a low of $681 million in FY 23-24 i.e. 79 per cent lower than the previous year. With the high inflow of foreign reserves that Pakistan is experiencing now from remittances, the current account just might end up being balanced.

    The remittance situation is so positive that experts have begun to compare it to the large inflows that were seen during the Pakistan Tehreek-e-Insaf (PTI) led government.

    Under former Prime Minister Imran Khan, remittances surged past $31 billion to an all-time high in 2022. However, remittances are projected to cross an astounding $34 billion.

    While this would be great news for lawmakers, the real winners here will be the businessmen of the nation. This is because these large inflows of money are often sent back to Pakistan with the intention of helping struggling family members back home. 

    This money can then be used to purchase goods and services from businesses in the local economy. These increased sales directly translate into an increase in the profit levels of business owners.

    Overseas Pakistanis have also historically sent money back home for the purchase of land or the construction of houses. The recent rise in remittances will help save the real estate and construction sectors.

    The real estate market has seen a severe slump. Even the largest residential societies have seen their plots of land diminish in value and price. 

    Overseas Pakistanis, however, are usually looking to make long-term investments. This lower price tag is precisely what makes purchasing land an attractive proposition – as it will appreciate over time.

    If this remittance money is directed towards the purchase of land, the country might see a revival of the real estate sector. Moreover, expatriates’ construction of houses will invaluably benefit businesses involved in the provision of building materials and supplies.

    For now, Pakistan benefits from each outbound flight carrying emigrants.

    After all, the remittance levels are of huge help to Pakistan, but only time will tell if the inflows of foreign reserves were worth the price that had to be paid: Brain drain.

  • July remittances post significant hike

    July remittances post significant hike

    The Pakistani diaspora has sent $3 billion back home in July, 48 percent higher than the previous year, The News has reported.
    State Bank Pakistan (SBP) data shows that remittances from Saudi Arabia increased by 56 percent to $761 million in July, while those from the United Arab Emirates increased by $611 million.
    The percentage reflected a 94 percent surge from the UAE compared to July 2023.

    Remittances from the United Kingdom totaled $443 million, a 45 percent increase from the previous year. Workers also sent $300 million from the United States, a 24 percent hike from last July.
    The research director at AKD Securities Limited, Awais Ashraf said, ‘’This increase is mainly due to the movement of worker remittance into the formal channel, spurred by the reduced rate difference between exchange companies and the interbank market’’.

    Throughout FY24, Pakistan posted a current account deficit of $681 million, equivalent to 0.2 percent of the gross domestic product.

  • SBP to introduce digital currency in Pakistan with technical support from IMF, World Bank

    SBP to introduce digital currency in Pakistan with technical support from IMF, World Bank

    In a media briefing held today in Karachi, Deputy Governor of the State Bank of Pakistan (SBP), Salimullah, announced that the central bank is currently evaluating the introduction of a digital currency.

    This project is being pursued with technical support from the World Bank, in collaboration with the International Monetary Fund (IMF).

    Salimullah highlighted that efforts are underway to link Pakistan with 60 countries, including those in the Middle East, to enhance remittance flows.

    Looking ahead, the governor revealed that the Raast payment system will be integrated with the Arab Monetary Fund’s cross-border payment platform, Buna, by next year.

    Buna facilitates secure, cost-effective, and transparent transactions for financial institutions and central banks across the Arab region and beyond, enabling payments in both Arab and major international currencies.

    The integration with Buna is expected to provide 60 million Pakistanis living abroad with the capability to transfer funds instantly and at minimal costs, significantly boosting economic and financial connectivity.

  • Record high: Overseas workers’ remittances hit $3.24 billion in May 2024

    Record high: Overseas workers’ remittances hit $3.24 billion in May 2024

    In May, overseas workers’ remittances soared by 54.2 per cent compared to the same period last year, reaching $3.24 billion, according to the latest data from the State Bank of Pakistan (SBP).

    This significant increase from $2.1 billion in May last year indicates a substantial boost in remittances.

    Month-on-month, there was a notable 15.3 per cent increase in remittances, totaling $2.81 billion in the previous month.

    Cumulatively, in the 11 months of the fiscal year 2023-24, total remittances amounted to $27.09 billion, showing a 7.75 per cent increase from $25.15 billion received in the same period last fiscal year.

    Saudi Arabia retained its position as the leading contributor, with remittances amounting to $819.28 million, marking a 56.4 per cent increase from the previous year. The UAE followed closely, with remittances of $668.48 million, showing a staggering 99.0 per cent year-on-year increase.

    Remittances from Pakistani workers in the UK surged to $473.22 million, a significant 54.4 per cent increase from the same month last year. Meanwhile, inflows from the USA amounted to $359.55 million, up by 39.8 per cent year-on-year.

    Additionally, remittances from Pakistanis working in EU countries witnessed a substantial 36.4 per cent year-on-year increase, reaching $339.99 million, according to the data provided by SBP.

  • World Bank greenlights $350 million for Pakistan’s fiscal reforms

    World Bank greenlights $350 million for Pakistan’s fiscal reforms

    The Board of Executive Directors of the World Bank gave its approval on Wednesday for a financing package of $350 million to support Pakistan’s fiscal and competitiveness reforms.

    This funding is allocated for the Second Resilient Institutions for Sustainable Economy (RISE-II) Operation, with the primary goal of strengthening fiscal management and promoting competitiveness for sustainable and inclusive economic growth, according to a statement from the World Bank.

    Najy Benhassine, the World Bank Country Director for Pakistan, stressed the urgent need for fiscal and structural reforms in Pakistan to restore macroeconomic balance and establish the groundwork for sustainable growth.

    He highlighted that RISE-II builds upon previous phases of tax, energy, and business climate reforms, aiming to generate additional revenues, improve expenditure targeting, and stimulate competition and investment.

    The RISE-II Operation is designed to enhance fiscal management by improving fiscal policy coordination, increasing debt transparency and management, strengthening property taxation, and enhancing the financial viability of the power sector.

    Additionally, the operation seeks to boost growth and competitiveness by reducing the cost of tax compliance, improving financial sector transparency, promoting digital payments, and facilitating exports through reduced import tariffs.

    Derek H. C. Chen, Task Team Leader of the operation, emphasised the crucial opportunity for Pakistan to address long-standing structural distortions in its economy after the upcoming general elections.

    Failing to seize this opportunity, he warned, could lead the country back into stop-and-go economic cycles.

    Recently, the World Bank projected a decrease in remittance flows to Pakistan, estimating a decline to $24 billion in 2023 and a further drop below $22 billion with a 10 per cent decline in 2024.

    The report attributed this trend to growing economic turmoil, a balance of payment crisis, and high debt, resulting in a loss of public confidence and a shift of remittances from formal to informal channels.

    Addressing Pakistan’s economic challenges, Martin Raiser, the World Bank’s Regional Vice President for South Asia, noted difficult situations, floods, and climate change.

    He highlighted that the country is trapped in a low-growth scenario with poor human development outcomes and increasing poverty. Raiser urged Pakistan to make crucial decisions for a brighter future, emphasising the need for difficult but necessary steps.

    In its October report, ‘South Asia Development Update Towards faster, cleaner growth,’ the World Bank projected positive growth for Pakistan in fiscal years 2023–24, albeit at a modest rate of 1.7 per cent.

    The report underscored the country’s dependence on capital inflows to finance substantial fiscal and current account deficits.

  • Overseas workers’ remittances to Pakistan dip to $2.3 billion

    Overseas workers’ remittances to Pakistan dip to $2.3 billion

    In November 2023, overseas workers sent a total of $2.3 billion in remittances to Pakistan, reflecting an 8.6 per cent decrease from the $2.5 billion recorded in October 2023, as per data released by the State Bank of Pakistan (SBP). 

    However, on a yearly basis, there was a 3.6 per cent increase in the monthly inflow compared to the same month in the previous year.

    Remittances are a crucial element in supporting Pakistan’s external accounts and play a vital role in boosting the country’s economic activity while also supplementing the disposable incomes of households dependent on remittances.

    The recent rise in remittances was attributed to an improved exchange rate following a crackdown against currency smugglers and hoarders. 

    This crackdown resulted in a reduction of the rate gap between the open and interbank markets. However, despite this positive trend, remittances have observed a decline on a monthly basis again this November.

    In the first five months of the fiscal year 2024, remittances amounting to $11 billion have been recorded, in contrast to $12.3 billion in the same period of the previous year.

    Breaking down the remittances, it was noted that overseas Pakistanis in Saudi Arabia sent the highest amount in November 2023, totaling $540.3 million. 

    This amount represented a 12.5 per cent monthly decline but was 5.5 per cent higher than the remittances in the same month of the previous year. 

    Remittances from the United Arab Emirates (UAE) also declined on a monthly basis by 13.6 per cent, from $473.9 million in October to $409.4 million in November. 

    However, there was a yearly improvement of 7.6 per cent. Remittances from the United Kingdom increased by 3.5 per cent to $341.7 million compared to October 2023.

    Conversely, remittances from the European Union declined by nearly 10 per cent on a monthly basis, amounting to $268.3 million in November 2023. Overseas Pakistanis in the US sent $261.5 million in November 2023, experiencing a month-on-month decrease of 7.7 per cent.

  • SBP reports $112 million increase in workers’ remittances

    SBP reports $112 million increase in workers’ remittances

    In September 2023, Pakistan experienced a notable surge in workers’ remittances, marking a 5.3 per cent increase compared to August 2023.

    This uptick can be primarily attributed to a crackdown on the informal money transfer systems known as hawala and hundi.

    According to the State Bank of Pakistan (SBP), the country received remittances amounting to $2.206 billion in September 2023, up from $2.094 billion in August 2023, equating to a $112 million rise.

    The majority of remittance inflows for September 2023 were derived from several key sources, with Saudi Arabia contributing $538.2 million, the United Arab Emirates $400 million, the United Kingdom $311.1 million, and the United States of America $263.4 million.

    This increase in remittances can be linked to the fact that a substantial number of Pakistani expatriates resorted to using the Hawala/Hundi channels during the initial two months of the fiscal year, largely due to a significant disparity between official and unofficial exchange rates.

    Subsequently, strict enforcement measures against illegal currency dealers have curbed this volatility, leading to a gradual appreciation of the Pakistani rupee in both the interbank and open currency markets.

    In the last month, the rupee has rebounded by 9 per cent, recovering from its record low of 307.1 against the dollar on September 5. The crackdown on these illicit currency dealers has also contributed to the 5 per cent month-on-month increase in remittances for September.

    However, when examining the entire first quarter of fiscal year FY24, the overall home remittances to Pakistan have experienced a sharp decline of 20 per cent, totalling $1.57 billion. Home remittances for the July-September period of FY24 amounted to $6.33 billion, a decrease from $7.90 billion during the same period in the previous fiscal year, FY23.

    During this initial quarter, remittances from all major sources displayed a downward trajectory. Specifically, home remittances from Saudi Arabia decreased by 22 per cent to $1.516 billion for July–September in FY24, down from $1.946 billion in the equivalent period in FY23.