PRI boom continues, despite analysts pessimism

There is simply no stopping to it. Silencing the critics from almost every quarter of Pakistans business and economics establishment, the remittances sent home by overseas Pakistanis recorded an inflow of $1.31 billion - its biggest ever single-month inflow. That puts the year-on-year increase at 39 percent for FY12 to date. Part of the hike could be attributed to the Eid factor, as this column pointed out in the August 11, 2011 review of monthly remittance. Data compiled by the State Bank of Pakistan shows that in the last four years, remittances have tended to edge higher by an average 10-11 percent (month-on-month) in the Gregorian month that coincides with the Islamic month of Ramadan. Beating expectations, however, August inflows jumped nearly 20 percent month-on-month - a trend that might not continue in the months ahead, according to critics. In another volatile movement, the gradually increasing reliance on inflows from Saudi Arabia and the UAE was checked last month. As a percentage of total inflows, remittance from Saudi Arabia had risen to 26.62 percent in July from an average of 23.84 percent in the fiscal year 2011. This had been partly attributable to PRI whose efforts to formalise remittance inflows have mainly been concentrated around flows coming from Saudi Arabia and the UAE. However, August saw the percentage share of Saudi Arabia and UAE falling by 298 basis points and 103 bps, respectively. This share was taken by higher inflows from the US and the UK; the share of the former in total remittance inflows rose by 234 bps over July, whereas that of latter increased by 169 bps. Again, just as absence of detailed remittances data, and analysis thereof, makes it difficult to forecast the numbers with precision, one can be too sure if the uptick in share inflows from the West will continue rising going forward. If the US and UK economies hit snags again, one could see unemployment rising in these countries, which in turn could trigger a fresh increase in workers monies from these countries. Economic observers; from the central bank to senior independent economists, all remain doubtful over the roots and the sustainability of the inflows. The sooner PRI folks present their understanding to the stakeholders; the better it will be to generate a wider consensus for broad-based policymaking.