The decline in 1QFY20 remittances made headlines last week. However, this was seen coming as remittances witnessed a seasonal slump in August 2019, which historically has been seen to shrink monthly remittances in the month following Eid–ul–Azha. On the other hand, remittances in September 2019 grew by around 18 percent year-on-year to $1.75 billion, which actually offset the decline in the previous month, taking the 1QFY20 tally very close to 1QFY19 (a decline of 1.4 percent year-on-year).
Whether the optimism over remittance prospects in the country is overplayed or not- it might be too early to answer the question. However, it has also been seen historically the foreign receipts from overseas Pakistanis actually see a growth after this seasonal dip. While 1QFY20 figures from the SBP show that the key corridors like UK, Saudi Arabia, UAE and the other GCC accounted for flat or a decline in growth, September 2019 showcased improvement in year-on-year numbers. Remittances from USA, UK, Saudi Arabia, UAE, and the other GCC that accounted for over 85 percent of remittances increased by 17, 22, 17, 18 and 21 percent year-on-year respectively.
This growth has come despite the economic slowdown in the global economy and a nationalization drive in many gulf countries.
The industry players and analysts too have not been wary of the decline in remittances in 1QFY20 as they are now seeing the stability in the currency value as a key booster for growth in remittances in the coming months besides efforts to by the central bank and PRI to keep going after hawala and hundi. Close to $23-23.5 billion is being eyed as a target that will be achieved for remittances in FY20.
Among the hindrances however, are the tight money laundering measures, regulatory oversight, an appreciated currency, recent alarm bells ringing over global economic slowdown, and country’s skill gap and the falling labor exports. Some suggest reducing reliance on Gulf, UK and USA and finding new destinations to export skilled and unskilled workforce. However, it makes little sense at least in the short term as it requires long term policy changes and revamping that cannot happen overnight as these are big corridors for remittances into the country and there are little prospects for Pakistani workers outside these corridors especially during these times of global economic slowdown.
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