Remittances FY17

And so it happened. Annual remittances to the country for FY17 took a first plunge in 13 years. The yearly figure for these foreign inflows stood at $19.3 billion, down by 3.08 percent year-on-year. Last year, the expatriates remitted $19.9 billion, a growth of 6.38 percent (in FY16).

This column has been revising its projections for remittance for FY17 based on seasonality as well as the monthly fundamentals; the latest in May 2017, it estimated full-year number to be $19.5 to $19.7 billion given that this year’s Ramadan inflow still had to come. However, June 2017 numbers have been low out of the blue. The past ten-year history at least shows that money sent home by the remitters has always been up in June on a year-on-year basis (see Chart-Percentage change in June remittances).

June remittances down by over 11 percent year-on-year, can be an important factor in lower than estimated FY17 remittances as it was expected that inflows would be higher due to month of Ramadan falling largely in June. Usually, those particular months in which bulk of Ramadan falls witness a sharp spike in remittance inflows. However, this narrative took a turn this time around with June 2017 figures dragging the annual remittances.

Overall, FY17 foreign receipts from the overseas Pakistanis have witnessed a decline from all major markets. To be precise, remittances from Saudi Arabia, UAE, UK, and USA were down by 8.35, 1.27, 9.36 and 3.22 percent in FY17 versus those in FY16.

Channel checks with experts suggest that the growth in remittances will remain lukewarm in the coming fiscal year as well because of subdued oil prices and light labour markets in the GCC world, which accounts for the bulk of inward remittances.

SBP in its latest quarterly report also highlights that the decline in remittances has been observed from all major corridors, including Saudi Arabia, UAE, US and UK. However, it raises hopes by pointing out that the decline of remittances from Saudi Arabia is expected to be compensated by a gradual pick up in inflows from other GCC countries, going forward; the likes of Expo 2020 in Dubai, FIFA World Cup 2022 in Qatar and Kuwait’s recent decision to lift visa restrictions for Pakistanis will have positive impact on remittance inflows. Moreover, it also stressed that the government is planning to launch Pakistan Development Fund for the Pakistani diaspora in order to channelize their remittances more effectively, which might boost remittances like PRI did.