Last update: Sun, 14 Feb 2016 06am
Home» BR Research - Pakistan Macroeconomics » External Account

Remittances: the March factor

Money doesn’t grow on trees. But when it comes to remittance inflows in Pakistan, the onset of spring sees a rather sharp increase in worker monies coming home to their families.

The central bank’s latest data show that remittances inflows jumped 25 percent month-on-month in March 2011 – its highest month-on-month increase since March 2010, when it increased 30 percent over February 2010.

This March factor has been a common feature in the last few years. And apparently it’s not because of the PRI scheme. Officials, speaking on condition of anonymity, attribute this trend to two major reasons.

One, is the low base effect on a month-on-month basis; remittance inflows typically start tapering off from October/November and remain low till February. That’s not only because of lesser number of working days during this period, but also because a number of Pakistanis come home for vacations in the winters, owing to which remittance inflows drop in this period.

Officials also attribute the seasonal up-tick in March to the commencement of classes at secondary level education – and hence school fees etc – that triggers a demand for workers’ money.

As for the highest ever single-month inflow of $1.05 billion last month, hats should be off to PRI managers.

It appears that their efforts have been reaping phenomenal fruit, with the $11 billion target for FY11 becoming clearer by the day. Officials expect to take the annual remittance inflow to $20 billion over the next two to three years.


So far, most efforts have been directed to improve the payment infrastructure. These include reducing service delivery time and increasing on the ground presence. Reportedly, some 300 agreements have been signed between Pakistani and global banks.

In addition, large banks are lending out their branch network to smaller and medium sized banks to augment their penetration in under-served areas, whereas home remittance centers are also planned to be set up in the far-flung areas.

The combination of these efforts has boosted banking penetration. “Two years ago, only 30 percent of the remittances sent through banks used to be channeled to the beneficiaries’ direct bank account; today that number is about 60-63 percent,” one official told BR Research.

The achievements thus far mostly stem from PRI’s focus on converting informal inflows into formal. ‘Send-more-to-Pakistan’ will be the next phase, as remittance channels will be connected to a variety of savings schemes at home.

That, however, will be the real test to measure the confidence of overseas Pakistanis. And looking at their participation in local equities (NCCPL data show dismal participation of overseas Pakistanis), it appears the PRI managers will have a tough time convincing them to invest in Pakistan.