Eidul Azha boosts remittances to near record highs

KARACHI:

Remittance inflows from workers sent home by overseas Pakistanis remained robust against expectations in June 2024, posting the second-highest monthly receipts on record at $3.16 billion amid Eidul Azha celebrations. That increase pushed full-year inflows past $30 billion in the fiscal year ending June 30, 2024.

Healthy remittance numbers are expected to keep the current account deficit modest for both the month and the full year, extending support for the rupee to remain strong against the US dollar in the near term (up to six months). According to State Bank of Pakistan (SBP) data, incoming remittances increased by 44% in June 2024 compared to $2.19 billion in the same month of the previous year. Inflows, however, declined by a nominal 3% in June compared to the record high of $3.24 billion received in May 2024.

Cumulatively, workers’ remittances rose 11% in FY24 to $30.25 billion against $27.33 billion in FY23. The figure for FY24 is slightly lower than the $31.28 billion received in FY22, suggesting some leakages in the system. At the same time, it shows room for further growth in the coming year.

The main sources of inflows are Saudi Arabia, from which expatriates sent $809 million in June 2024, followed by $654 million from the United Arab Emirates (UAE). They sent $487 million from the United Kingdom (UK), $330 million from European Union (EU) countries, $322 million from the United States of America (US), and $556 million from other countries in June 2024. Topline Research attributed the outstanding inflows in June to Eidul Azha as non-resident Pakistanis sent higher funds to their family members back home to support them in dealing with increased inflation during the festival.

Speaking to The Express Tribune, Yousuf Rahman, Head of Research at KASB Securities, noted that the increase in remittance inflows in June was against expectations of some contraction as receipts historically tend to fall after Eid. He pointed out that the increase in workers’ remittances was mainly recorded in the second half (January-June) of 2014 as a large number of Pakistanis found work abroad amid the economic crisis in Pakistan. They contributed to the country’s economy by sending healthy remittances throughout the year.

Additionally, the higher rate of inflation in the country has prompted non-resident Pakistanis to send significantly higher amounts to their relatives to cope. Rahman stressed that the government’s crackdown on illegal foreign exchange markets and illegal Hawala-Hundi operators, especially in areas neighboring Afghanistan, has crushed black currency markets and encouraged expatriates to send funds through official channels, including commercial banks and registered companies. exchange. This shift promoted increased inflows throughout the year.

The return of stability in the rupee-dollar exchange rate also boosted non-residents’ confidence in the domestic economy, prompting them to remit a portion of their earnings for investment purposes. Non-residents remain significant investors in the real estate sector in the country.

Rahman predicted that worker remittance inflows will remain strong next year for several reasons, including the mass migration of Pakistanis abroad in search of work. In addition, a significant portion of Pakistani expatriates reside in Middle Eastern countries, where strong economies driven by rising oil prices continue to keep their earnings healthy, allowing them to send higher remittances to Pakistan.

Overseas Pakistanis sent $7.42 billion from Saudi Arabia in FY24, a 14% increase compared to $6.53 billion in FY23. Non-resident Pakistanis sent $5.53 billion from the UAE, up 19% from $4.65 billion in FY23.

They brought in $4.52 billion from the UK in FY24, showing an 11% increase from $4.07 billion the previous year.

Shipments from EU countries rose 13% to $3.53 billion in 2014, compared to $3.13 billion in 2013. Expatriates sent $3.53 billion from the US, up 11% from $3.17 billion in FY23.