The fiscal year is coming to a close, and the macroeconomic situation in the country is precarious. Unfortunately, the regular seasonal jump in home remittances during Ramadan did come through to provide the much awaited relief. But this does not come as a surprise given the changing pattern of inflows. The Middle East conduit for inward remittances is shrinking fast with the leading country (Saudi Arabia) leading the decline. Remittances for May 2018 stood at $1771.24 million, down by around 5 percent on a year-on-year basis, whereas month-on-month depicted a growth of around 7.3 percent.
Given the current pace, it is unlikely that the target of $20.7 billion for FY18 will be achieved, which means that the country needs $2600 million inflows from the expatriates in June 2018 – an increase of 45 percent year-on-year, and around 50 percent month-on-month. In comparison touching $20 billion seems more realistic. During 11MFY18, the overseas Pakistanis sent home a little over $18 billion, which is a tepid growth of 2.95 percent year-on-year.
Remittances have been moving slowly and steadily; but slow and steady isn’t always a winner. And while over-reliance on remittances has been highlighted as not a sustainable strategy, maybe upping efforts to boost these inflows is one way to counter the deteriorating other foreign exchange inflow means. Remittances today in Pakistan face additional threat from grey listing of Pakistan under FAFT. Therefore, apart from the efforts of PRI and SBP mentioned in “Remittances remain on steady course”, published on May 13, 2018, bringing foreign exchange companies that account for around 15-16 percent of the inflows as per some conservative estimates, under strict anti-money laundering regulations can help salvage this share.
And while it is still not clear as to how the tax amnesty scheme will affect remittances going forward, some fears are being voiced. For one, 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. And second, the players in the real estate sector are pointing towards the restriction by the government on non-tax filers to invest in real estate as a major setback. To be precise, the amnesty scheme has announced that non-tax filers won’t be allowed to buy property valued over Rs5 million from July 01, 2018.
According to them, this restriction would eventually invite more transactions via illegal channels like ‘hawala’ and ‘hundi’, where a big chunk of the total remittances come into real estate and property.
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