By Salman Siddiqui
Published in The Express Tribune on August 17, 2022
KARACHI: The flow of remittances sent home by overseas Pakistanis slowed down to a five-month low at $2.52 billion in the first month (July) of current fiscal year mainly due to lesser number of working days in the month.
“Otherwise, no big change has taken place in global economic fundamentals in the recent past that could be blamed for the apparent temporary drop in the remittances’ inflows during July,” Ismail Iqbal Securities Head of Research Fahad Rauf said while talking to The Express Tribune.
Remittances slowed down 8.59% to $2.52 billion in July compared to $2.76 billion in the previous month of June 2022. The inflows decelerated 7.75% compared to the same month of last year, the central bank reported on Tuesday.
“This (slowdown) was due to considerably fewer working days because of Eid holidays,” the State Bank of Pakistan (SBP) said on its official Twitter handle. “The daily average rate of remittances was 18% higher in July than in June.”
There were only 17 working days during July compared to 22 in June 2022 and 18 in July 2021, the central bank added.
“Remittances worth $2.5 billion in a month are not bad,” Rauf said.
Remittances have mostly remained in the band of $2.5 billion to $2.8 billion a month for quite a long time. If they remain at $2.5 billion or slightly higher, then it will be good. Therefore, the full-year (FY23) remittances would come to around $30 billion compared to the record high of $31 billion in FY22, he said.
However, one should not give higher importance to the drop in July. “Clarity on remittances’ trend and the outlook will come in August. Apparently, the remittances should remain stable over the next three to four months considering nothing significant has changed in the global economy,” he said.
The central bank added that workers’ remittances had continued their record streak of above $2 billion a month for the past 26 consecutive months.
Arif Habib Limited Head of Research said historical evidence suggested that remittances usually dropped in the month after Eid.
More importantly, the extended holidays in the Middle East due to Eid, Hajj and Umrah seasons during July kept their business centres closed including the money senders. “This impacts the flow of remittances through official channels.” Rauf said that nothing significant had happened that could be attributed to the drop in remittances in July. For example, the oil-exporting Middle Eastern economies have continued to perform well for a long time, unlike the US and European economies which are facing high inflation and fearing recession amid the Russia-Ukraine conflict.
Pakistan receives a large chunk of remittances from the Middle Eastern countries (mostly from Saudi Arabia and the UAE) where the majority of Pakistanis migrate for job purposes.
A major drop in remittances has been seen from Saudi Arabia and the UAE in July compared to the US and Europe, which are in trouble these days since the Russia-Ukraine conflict.
“However, the situation in US and Europe is not so bad. They have reported no job losses as well. So, the flow of remittances from Western counties is expected to remain stable instead of any drop in near future.”
The lesser number of working days has slowed down the flow of the “official remittances” in July, he said.
Remittances from Saudi Arabia decreased 12% to $581 million in July 2022 compared to $660 million in the same month of the last year. The inflows from UAE reduced 17% to $456 million during the month compared to $548 million in the corresponding month of the last year.
They improved 3% from the UK to $412 million compared to $398 million. Inflows slowed down 8% from the US and amounted to $254 million in July 2022 compared to $277 million in the same month of 2021.
From EU countries, the inflows decreased 2% to $294 million from $301 million in July 2021.
The flow of remittances from the remaining countries dropped 5% to $527 million in the month compared to $552 million in the same month of the last year.
Pakistani currency inched up by 0.04% (or Rs0.08) and closed stable at Rs213.90 against the US dollar in the interbank market on Tuesday.
With this, the domestic currency has recovered over 11% in the past 11 consecutive working days.
Abbas said the currency is expected to recover further ground to Rs200 against the greenback over the next 20 to 30-day.