Remittances - no direct threat yet

The government would not want to endanger home remittances - the staple food for the current account, and so the speculations of taxing these cash inflows were turned down in the Budget FY16 as well. The Economic Survey of Pakistan 2014-15 shows that the current account (CA) deficit narrowed by around 50 percent to $1.4 billion in the first ten months of FY15 partly due to higher remittances. While the current account shrunk substantially in FY15, hopes for robust growth in FY15 are also pinned to rise in remittance receipts along with lower oil prices.
Pakistan Remittance Initiative started in 2009 was a step in the right direction where the first phase of enhancing the flow of remittances through formal channels has been satisfactory. However, the second phase that includes the execution of securitization of home remittances to bring in investment still needs to be taken up by the authorities.
With 11MFY15 figures announced by the central bank, total remittances for the eleven-month period have reached $16.63 billion, a rise of 16 percent year-on-year. Figures of May 2015 alone show a rise of 15 percent year-on-year to $1.66 billion, whereas the external receipts remained flat on a month-on-month basis.
Like always, the highest amount for 11MFY15 was received from Kingdom of Saudi Arabia followed by the UAE. Though no major decline in home remittance has been witnessed post the oil price crash, the latest Economic Survey report continues to highlight the looming threat of falling oil prices. Around 65-67 percent of the external resource comes from Saudi Arabia, UAE and the other GCC countries altogether, and the annual economic report card emphasizes how this could be worrying in the medium term due to falling oil prices; "While the SBP believes that Middle East countries have sufficient sovereign funds to continue with their prodigious spending on infrastructure, falling oil prices will eventually puncture the euphoria", it says.
Be that as it may, the threat may still not be that severe. No major fall was seen in worker remittances in the region as well, and certainly not in those for Pakistan. One explanation for this could be the sector of worker concentration; since most of the inflows come from the Middle East, it is plausible that the majority of the receipts come in from the construction or the service industry that were least affected by the oil price scenario.