Remittances in the last few months have beaten the rising concerns of COVID-induced slowdown in the receipts of these foreign inflows. Not only have they continued to support the current account but have been rising in a time when the outlook has been bleak given the slowdown in host economies employing expats. Oil prices have also been dreary for oil economies that host majority of Pakistan’s overseas residents.
Remittances for September 2020 as announced by the central bank continue to be over $2 billion mark – a psychological threshold for these inflows to be considered high; monthly remittances were over $2 billion in the fourth consecutive month. Moreover, the September 2020 remittances are up again after falling in August 2020 - which were still over $2 billion. In September 2020, remittances grew by 31 percent year-on-year. while the month-on-month growth stood around 9 percent. Overall, the growth for 1QFY21 for remittances has been commendable, which was also 31 percent year-on-year.
The trend of strong remittance continued in September 2020 led by US, UK, and Saudi Arabia. In the past few months, the growth in remittances has-been attributed to various reasons like negligible Hajj expenditure; Ramzan; the two Eid festivities and associated charity; the alleged return of expats from host countries with their savings due to economic downturn brought by oil prices and COVID-19; and diversion of informal remittances towards formal channels as travel and borders remained restricted as well as the tightening of informal money markets. With situation relatively better than previous months in terms of COVID-19 related lockdowns and restrictions, what could have helped remittances continue to grow in September when market has been expecting a slowdown? Multilateral agencies and development banks have also heralded the expected slowdown in key remittance dependent countries earlier this year.
The explanation for the sustained increase in workers’ remittances in September by the central bank is Pakistan Remittance Initiative’s (PRI) efforts as well as gradual re-opening major host destinations such as Middle East, Europe, and United States.