Remittances Review

Experts record that governments and central banks globally are showing clear intentions of doing everything possible to mitigate adverse economic effects. The immediate concern of economic strategy is to protect the livelihood of the people working in sectors which were considerably immediately affected through Lockdown. But there is no doubt, that covid-19 raised poverty as well as unemployment regardless of the strategy responses. Statistics showed that in the US, the unemployment rate reacted at 3.5 percent in February 2020, lowest rate in the past 67 years, the latest statistics of the Bureau of Labor Statistics USA identified it has increased to 14.7 percent in the span of few months, the highest since the great depression. It is also said that the UN’s work agency warns that hundreds of millions of people could be left without work because of the impact covid-19. Thus, the growth in the world remittance flows is predicted to decline. In the context of Pakistan, Covid-19 may have a double-edge impact: by the trade channel and by the remittances.

Remittances may decline considerably because of to lay-offs of Pakistani workers abroad because of economic slowdown globally. Although there was a 1.0 percent raise in workers’ remittances on a year on year (YoY) basis in April 2020 and for July-April FY2020, there is a 5.5 percent growth as compared to the corresponding period previous year. But there is not only a risk of decline in workers’ remittances in the future but also more challenging will be the influx of returning migrant workers because of job losses. Similar to worldwide conditions, within Pakistan raise in unemployment is inevitable. According to the statistics prepared through Sub-committee of the National Coordination Committee for covid-19 on Economic Analysis, 72 percent of Pakistan’s non-agriculture workforce is engaged in the informal sector, with no social security or insurance cover and it may take a major hit. The predicted size of informal employment in non-agriculture sector is almost 27 million, with only food, pharmaceuticals, and few services still functional, these employees will be worst affected. As out of 27 million, approximately 86 percent are engaged in wholesale and retail trade, transport, construction, manufacturing, hotels & restaurants sector which are severely crippled because of the lockdown condition. According to HIES 2015-16, the government of Pakistan has 1.93 average earners per household. With, these breadwinners of their household out of job or at risk of losing one and with an average household size of 6.7 persons, total affected people will be over 81 million people out of a total population of 220 million, through this channel only. Global supply chain disruption has further exacerbated the economic woes across the globe. In the developing countries like Pakistan, the government of Pakistan also started experiencing this trade shock. According to Pakistan Bureau of Statistics, exports remained $ 957 million in April 2020 which in dollar terms has fell by 54 percent as compared to April 2019 and declined by 47 percent as compared to March 2020. Likewise, imports also declined by 32 percent compared to April 2019 and declined by 3 percent compared to March 2020. showed that overseas Pakistanis sent the highest-ever $8 billion remittances during the first quarter of FY2021, recording a growth of 12.5 percent over the corresponding period previous year. The State Bank of Pakistan (SBP) recorded that with inflows of $2.7 billion in September, workers’ remittances continued their strong momentum and remaining above $2 billion since June 2020.

This is the 7th consecutive month when inflows registered almost $2.7 billion on average. In terms of growth, statistics also show that remittances were raised by 17 percent in September as compared to the corresponding month previous year, while comparing with August inflows it was 0.5 percent higher. The surging imports in 1QFY22 widened the trade deficit putting immense pressure on the rupee-dollar exchange rate which ultimately reflected in higher current account deficit. Pakistan had received record remittances of $29.4 billion in FY2021 which assisted it curtail the current account deficit. Presently, SBP has taken various initiatives to curtail outflow of dollars and reduce the import bill, but the exchange rate is still against the rupee which has lost about 11.5 percent during the last 5-month. Furthermore, the statistics also identified that the highest remittances were received from Saudi Arabia but they were 2.6 percent less than the corresponding period of previous year. During July-September 2021-22 the remittances from Saudi Arabia were recorded $2.025 billion as against to $2.080 billion previous year. It is also identified that the contribution of Saudi Arabia in the total remittances during the first quarter of FY2022 was approximately 25p percent. In September, the country received $691 million from the kingdom against $694 million in the corresponding month of previous year. The remittance from UAE was second highest as it witnessed a growth of 8.7 percent while it amounted to $1.545 billion during the first quarter of FY2022. The inflows from UK and USA recorded a growth of 13.2 percent and 32 percent amounting to $1.115 billion and $836 million respectively. The growth in the first quarter of FY2021 was 71.5 percent for UK and 63 percent for USA. For the first time, the inflows from EU countries surpassed the total inflows from other GCC countries. The inflows from EU countries increased $889 million as compared to $880.7 from the GCC countries. The remittances from EU countries raised by 47.8 percent as compared to the corresponding period of last fiscal year.

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