There is no drastic change in the picture for home remittances; the story remains the same where the country continues to see shrinking remittance receipts from overseas Pakistanis in Saudi Arabia due to the economic problems, labour market trends, localisation of jobs and introduction of VAT.
Remittance for April 2018 stood at $1650.6 million, which was 7.25 percent higher on a year-on-year basis, but around 7 percent lower on a month-on-month basis. Cumulatively, remittances for 10MFY18 stood at $16.257 billion, up by 3.92 percent year-on-year.
During the ten-month period, inflows from Saudi Arabia slipped by 9 percent, while the key growth contributors were US, UK and Dubai that accounts for most of the inflows from UAE. Apart from Dubai, a look at important corridors like the UAE and the GCC show that the inflows have either been declining or have remained subdued. For more information on the likely reasons, refer to “Where are remittances headed?” published on April 12, 2018.
The decline from Saudi Arabia has lately been offset by the higher inflows from the UK and the USA where the Economic Survey 2017-18 highlights that robust economic growth and low unemployment in US along with strong growth in UK and a sharp appreciation of the British Pound against US dollar led to significant growth from these two corridors.
Some measures that have been taken during current year to boost remittances include Asaan Remittance Account and the promotion of home remittances through M-wallets. Whereas the latest budget proposal includes a Prize Scheme for overseas Pakistanis where all home remittance transactions sent through commercial banks, exchange companies and other financial institutions will be included in monthly lucky draws. Details of the scheme will be announced later by SBP.
However, what is still not too clear that how the tax amnesty scheme will affect remittance? The scheme might reduce inflows as now the FBR will have the right to question the source of remittance above $100,000, though these inflows still remain untaxed. On the other hand, the scheme on the whole can also positively affect the inflows if it is successful in legalising wealth and reducing under invoicing.
So while stability in home remittances is a good sign especially when the largest corridor is shrinking, it is also time for the policymakers to realise that no more can the country bank on these foreign exchange earnings to “correct” the current account deficit. Yes, they are a reliable source of foreign inflows and all efforts to boost this window are welcomed; but the focus should be to address the balance of payment situation. While exports have gradually increased, and increase in imports have been somewhat slowed down by the currency depreciation recently, exports still need a boost and imports still need to be tightened to control the trade deficit. Those at the helm must realise that remittances are not likely to show any major up tick in comparison to the growth in trade deficit.
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