ISLAMABAD, OCT 06 (DNA) — As the remittances to Pakistan has hit a record high in first two months of the current fiscal year the Pakistan Industrial and Traders Associations Front (PIAF) has said that foreign remittances flows are crucial which can support the country’s account balance amidst low volumes of foreign direct investment (FDI) and nominal growth of exports.
PIAF chairman Faheemur Rehman Saigol observed that overseas Pakistanis sent 44 per cent more remittances in the first two months of July and August of the current fiscal year (FY25), compared to the same period of the previous fiscal year. In July, remittances went up by 48 per cent year-on-year, setting a trend of higher inflows.
The receipts for July were $2.994 billion, but it dipped to $2.942bn in August. According to data issued by the State Bank on Monday, the inflows during July-Aug FY25 rose to $5.936bn, while inflows in the same period of previous fiscal year FY24 was $4.123bn — an increase of $1.813bn, or 44 per cent.
The PIAF Chief said that the inflows must be a relief for the government at a time when it is struggling to strike a deal with the donor agencies. This inflow would not only improve Pakistan’s image in the eyes of international rating agencies but will also open doors for other sources. The country managed to bring down the current account deficit in FY24 to a negligible $665 million while it was just $162m in July FY25.
Although the economy suffered due to restricted imports and growth fell to just 2.4 per cent in FY24, the government succeeded in tackling the current account deficit.Faheem Saigol said that if remittances keep improving at the same pace, the country would be able to increase its imports to spur growth.
Data showed that inflows from almost all destinations rose during the first two months while the highest increase among important destinations was from the UAE. Remittances from UAE jumped by 84.3 per cent to $1149m from $624 in the first two months of the previous fiscal year.
However, the highest inflows were from Saudi Arabia, which rose 50.7 per cent. Remittances from Saudi Arabia shot up to $1.473bn during July-Aug FY25, compared to the same period of last year fiscal year.
The other important inflows were $ 918.3m from UK (up by 44.4 per cent); USA $622.4bn (up 23.5 per cent); GCC countries $569.7m (up20.4 per cent) and EU countries $726.6 per cent (up 26.5 per cent). The inflow from EU has exceeded the inflows from the GCC countries. Currency experts said one of the reasons for higher remittances is the tough stance of the government against illegal currency business.
They said the currency smuggling and Hundi and Hawala system are working at the lowest level.
The PIAF leader said that gulf should further be motivated to maintain an upward momentum in remittances, as they contributed more than 60 percent of the total inflows during last couple of months. Quoting the State Bank of Pakistan, he reported that remittances in May totaled $3.2 billion, an increase of 54.2 percent over the same month last year.
Remittances are a major source of non-debt-creating inflows that Pakistan relies on to maintain its foreign exchange reserves. Even though the SBP’s reserves, which were $9.1 billion, are sufficient to cover imports for nearly two months, they are still low and won’t be sufficient to fund expected external financing needs for the next few years at the very least.
Pakistan has a looming deadline to repay a substantial amount of debt, much of which relies on debt rollovers. He said that remittances can help not only in financing the deficit in import payments but also in foreign debt repayments, suggesting the government to focus on structural reforms, which can revive Pakistan’s economic growth with major focus on incentives for overseas Pakistanis workers. —DNA
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