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Remittances to Pakistan remain robust despite uncertainty worldwide

The impact of Covid-19 pandemic is pervasive when viewed by a migration lens as it affects migrants and their families who rely on remittances. The World Bank continues working with partners and states to keeps the remittance lifeline flowing. International reports note that in various countries annual transfers of money through foreign migrant workers to their home countries play a chief role. These remittances offer income support for family members back home and, in some scenarios, offer funding for start-ups. It is also noted that remittances are also a source of foreign exchange reserves for developing countries including Pakistan and assist contain trade balances and widen the revenue base by increased consumption. According to the estimates published in the World Bank’s Migration and Development Brief, as the COVID-19 pandemic and economic crisis continues to spread, the amount of money migrant workers send home is predicted to fall 14 percent by 2021 as against to this pandemic levels during 2019. Statistics identified that remittance flows to low and middle-income countries (LMICs) are predicted to decline by 7 percent, to $508 billion during last year 2020, followed by a further fall of 7.5 percent, to $470 billion in 2021.

Estimates And Projections Of Remittance Flows (Growth rate, %)
Region 2009 2016 2017 2018 2019e 2020f 2021f
World -5.1 -0.9 7.7 8.0 2.8 -19.9 5.2
Low and Middle Income -5.0 -1.5 9.1 9.0 4.4 -19.7 5.6
East Asia and Pacific -4.8 -0.5 5.1 6.8 2.6 -13.0 7.5
Europe and Central Asia -14.7 -0.3 20 10.9 6.6 -27.5 5.0
Latin America and the Caribbean -11.3 7.4 11 9.9 7.4 -19.3 5.9
Middle-East and North Africa -6.2 -1.2 12.1 1.4 2.6 -19.6 1.6
South Asia 4.5 -5.9 6.2 12.1 6.1 -22.1 5.8
Sub-Saharan Africa -0.2 -8.3 9.3 13.7 -0.5 -23.1 4.0

International experts urge that the foremost factors driving the fall in remittances include weak economic growth and employment levels in migrant-hosting states, weak oil prices; and depreciation of the currencies of remittance-source states against the US dollar. According to the World Bank Remittances to South Asia were projected to fall almost 4 percent during last year to $135 billion. In Pakistan and Bangladesh, the impact of the global economic slowdown has been somewhat countered through the diversion of remittances from informal to formal channels because of the difficulty of carrying money by hand under travel restrictions. Sources record that Pakistan also introduced a tax incentive whereby withholding tax was exempted from July 1, 2020, on cash withdrawals or on the issuance of banking instruments/transfers from a domestic bank account.

State Bank of Pakistan’s (SBP) statistics also identified that Remittances from Pakistani workers employed abroad grew to $2.7 billion in March 2021, a 43 percent rise year-on-year and up 20 percent against to the last month. Remittances remained above $2 billion for a 10th consecutive month chiefly because of the increased use of formal channels and additional transfers through the migrants to support their families during Covid-19 pandemic. It is also said that Remittances grew 26.2 percent to $21.5 billion in July-March FY2021, compared with $17.0 billion in the corresponding of previous fiscal year. Furthermore, most of Pakistan’s remittances are sent by the expatriates living in Saudi Arabia, UAE, UK, and USA. These inflows work as a pillar of support for the South Asian economy, which suffered an economic slowdown because of ongoing pandemic cases. Remittances from Saudi Arabia grew 20 percent to $5.7 billion in July-March FY21.

Statistics also identified that cash sent back to family members from Pakistani diaspora in UAE was at $4.5 billion 9-month of this fiscal year. That compared with $4.2 billion a year ago. The country attained $2.9 billion from UK, up 61.8 percent from a year earlier. Remittances from the USA also grew 52.6 percent to $1.9 billion in July-March FY2021. Remittance inflows have been on a persistent rise since previous year, as a rising number of Pakistani workers living in the Gulf, USA and Europe managed to send extra money to relatives back home to alleviate the devastating impact of this pandemic.

Different sources record that Pakistani migrants remitting home the money saved for international travel, mainly religious travel like Hajj and Umrah because of a sharp reduction in the number of Umrah and Hajj visas to contain the outbreak. The Transfers of accumulated savings through returning overseas workers also contributed to the increase in remittances flows to the country. Remittance flows to Pakistan are predicted to remain robust, despite an uncertainty around the worldwide recovery amplified through the third wave of Covid-19 pandemic. The dim prospects for growth and employment opportunities and deteriorating situations in the sending states are unlikely to affect the remittance growth in the country. Moreover, the seasonal factors of Eidul-Fitr festival and the holy month of Ramazan would also possible assist sustain the continual upward growth trajectory.

Analysts expect workers’ remittances to rise to $27 billion this fiscal year. IMF in its latest report projects remittances to be $24.6 billion, close to the SBP’s projection of $24-25 billion for FY2021.

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