What led to ‘abnormal increase’ in remittances from Saudi Arabia? Expert answers
- No cash transaction took place through Hajj/Umrah movement owing to a limited Hajj this year and ban on Umrah in place amid COVID-19, which pushed people towards using formal channels.
Despite the decrease in global economic activity due to outbreak of COIVD-19, Pakistan’s remittance inflows continued to show impressive gains, with remittances from overseas Pakistanis reaching $2,768 million in July 2020, the highest ever amount in one month in the history of the country.
The remittances inflows showed an increase of $740mn (or 36.5pc) over last July and an increase of $302mn (or 12.2pc) over June.
Financial analyst Ali Khizar, Head of BR Research questioned regarding the ‘abnormal increase’ in remittances from Saudi Arabia, with remittance inflows of $821.55mn in July 2020 as compared to $619.43mn recorded in June and $470.95mn recorded in July 2019, showing an impressive yearly growth rate of 74.5pc.
The analyst was of the view that the increase comes as no cash transaction took place through Hajj/Umrah movement owing to a limited Hajj this year and ban on Umrah in place amid COVID-19, which pushed people towards using formal channels. Furthermore, the return of families from KSA, due to the imposition of new taxes in the Kingdom and arrival of jobless people also adds to the remittance inflows, he said, in a tweet post.
“One other reason for an increase from Saudis Arabia is that SBP is now (from July) reporting remittances from the host country; not from the routing country,” said Khizar. Thus some of the flows from the US and Malaysia used to be from other countries, he added.
The SBP observed that in their submissions to partner banks in Pakistan, some of the money transfer companies and overseas banks had been reporting the country location of their head offices as the origin of the remittance instead of the country of residence of the remitter from which their subsidiaries had originally collected the remittance.
While this does not affect the overall level of remittances arriving in Pakistan, it does affect the allocation of remittances by source country. After consultation the State Bank of Pakistan has decided to improve the current practice and compile the data according to the original country of the remitter.
It is interesting to note that since the global outbreak of Coronavirus in February 2020, remittances have increased by 14.3 percent compared to the same period last year.
Comments
Comments are closed.