AIRLINK 62.48 Increased By ▲ 2.05 (3.39%)
BOP 5.36 Increased By ▲ 0.01 (0.19%)
CNERGY 4.58 Decreased By ▼ -0.02 (-0.43%)
DFML 15.50 Increased By ▲ 0.66 (4.45%)
DGKC 66.40 Increased By ▲ 1.60 (2.47%)
FCCL 17.59 Increased By ▲ 0.73 (4.33%)
FFBL 27.70 Increased By ▲ 2.95 (11.92%)
FFL 9.27 Increased By ▲ 0.21 (2.32%)
GGL 10.06 Increased By ▲ 0.10 (1%)
HBL 105.70 Increased By ▲ 1.49 (1.43%)
HUBC 122.30 Increased By ▲ 4.78 (4.07%)
HUMNL 6.60 Increased By ▲ 0.06 (0.92%)
KEL 4.50 Decreased By ▼ -0.05 (-1.1%)
KOSM 4.48 Decreased By ▼ -0.09 (-1.97%)
MLCF 36.20 Increased By ▲ 0.79 (2.23%)
OGDC 122.92 Increased By ▲ 0.53 (0.43%)
PAEL 23.00 Increased By ▲ 1.09 (4.97%)
PIAA 29.34 Increased By ▲ 2.05 (7.51%)
PIBTL 5.80 Decreased By ▼ -0.14 (-2.36%)
PPL 107.50 Increased By ▲ 0.13 (0.12%)
PRL 27.25 Increased By ▲ 0.74 (2.79%)
PTC 18.07 Increased By ▲ 1.97 (12.24%)
SEARL 53.00 Decreased By ▼ -0.63 (-1.17%)
SNGP 63.21 Increased By ▲ 2.01 (3.28%)
SSGC 10.80 Increased By ▲ 0.05 (0.47%)
TELE 9.20 Increased By ▲ 0.71 (8.36%)
TPLP 11.44 Increased By ▲ 0.86 (8.13%)
TRG 70.86 Increased By ▲ 0.95 (1.36%)
UNITY 23.62 Increased By ▲ 0.11 (0.47%)
WTL 1.28 No Change ▼ 0.00 (0%)
BR100 6,944 Increased By 65.8 (0.96%)
BR30 22,827 Increased By 258.6 (1.15%)
KSE100 67,142 Increased By 594.3 (0.89%)
KSE30 22,090 Increased By 175.1 (0.8%)

Perhaps you thought oil is going to hit remittance inflows. Think again! The monthly numbers released this week show a 15 percent year-on-year jump in first half inflows as against a growth of 9.5 percent in the year-ago period.
It is true that the average monthly inflow in the second quarter FY15 stood at $1428 million as against $1564 million in the quarter ending September 2014. But that is largely due to seasonal downturns in October and November (Read BR Research story, "Will the remittance rally go on," published December 12, 2014). A closer look reveals that remittance inflows in December 2014 actually shot up 20 percent on month-on-month basis and 14 percent in year-on-year terms.
In fact a look at the contribution of major remittance sources only strengthens the case that oil price decline seems to be having a zero impact on the inflows. The average monthly inflow from Saudi Arabia - a major oil producer and major market for Pakistani labour - stood at 29 percent of the total in the first quarter. In the second quarter it averaged 30 percent of the total, with November and December 2014 both receiving 32 percent of their inflows from Saudi Arabia.
Unless the likes of Saudi Arabia have already started axing employees due to oil price decline - something we have not heard of to date - then increased contribution from the Kingdom in recent month only shows that oil is unlikely to hit hard on Pakistan's remittance inflows in the short term.
In the long run, however, we may face some trouble only if oil prices remain depressed for a prolonged period. This column will not attempt to predict long-term oil price movements, but it will dare say that if certain mitigating factors play out as per plans and if the Gulf authorities manage things the right way, then oil decline should not terribly affect remittance inflows.
For one, keep in mind that many of these oil producing countries with large Pakistani diaspora already have decent reserves to buttress their economies. So there is no immediate forex problem.
Second, sources who closely observe the remittance market point out, rather correctly, that a majority of Pakistani workers have been going into construction-related projects that are of medium- to long-term nature. These include projects for Qatar's FIFA 2022 bid and Dubai Expo 2020. Similarly, inspired by the Dubai model, there is a private sector real estate boom in Abu Dhabi, Bahrain, Oman, Ras Al Khaimah, and even in Saudi Arabia. These should act as adequate mitigating factors for any consistent oil price decline.
Third, the current size of informal remittance is $8 billion at present, according to conservative estimates (For more on that, read BR Research interview with the head of Pakistan Remittance Initiative (PRI), published on January 9, 2015). Assuming that the hit from oil price is worse than expected and therefore the size of informal remittance drops to $5 billion - even then thats a sizeable number to work on, to formalise it and boost annual official remittance inflows.
But this largely depends on the PRI, whether it can continue increasing tie-ups and taking steps to formalise the inflows or not. If its past performance is any guide, it should be able to do so.
Lastly, if Pakistan must continue to rely on remittances over the long run, then there is a need to diversify the markets and the industry category our workers go to. Construction-related labour exports will likely slowdown over the next 5-6 years. What will then matter even more is quality labour export - the likes of doctors, engineers, paramedical staff and those in the hospitality business (BR Research story, "Vocational training matters," published yesterday, has more on this subject).
Anyway, with 1HFY15 numbers at $8.98 billion, the full-year central bank forecast of $16.7 billion seems to be easily achievable, especially considering that the last quarter of each fiscal year is usually marked by spiked growth in inflows (see illustration). Maketh way for the remittance galore!

Comments

Comments are closed.