What does a billion dollar windfall mean for Pakistans economy?
Too much, in these times, especially!
Overseas Pakistanis have sent home an additional $1.01 billion in the eight months ending February 2014. As per the latest SBP statistics, remittances in the Jul-Feb period reached $10.24 billion. Thats a nearly 11 percent growth over the same period last year. That kind of growth is really impressive, given the high base remittances have accumulated due to healthy growth in recent years.
Inflows from top remittance origins by value have shown great heart this year. Saudi Arabia ($2.96 billion), UAE ($2.02 billion), US ($1.62 billion), UK ($1.46 billion) and other GCC countries ($1.19 billion), have all recorded healthy, double-digit year-on-year growth during 8M FY14 (except for UAEs 8.6 percent).
In the spotlight is the double-digit year-on-year growth in monthly inflows. Februarys inflows were recorded at $1.2 billion, showing a yearly growth of 18 percent. With that, six out of eight months in FY14 now boast a year-on-year increase of 10 percent or more. Recall that Februarys robust inflows are preceded by 14 percent yearly growth in January and 22 percent in December.
As the graph shows, the historical pattern of month-on-month decline in recent years has held up for January and February inflows (down 10 percent and 3 percent, respectively). If the pattern extends, expect a possible uptick in March remittances on monthly basis, a trend that may continue till June. But even if the trend does not live up, the scale of year-on-year growth in monthly inflows guarantees a sizable remittance total by year end.
BR Research calculations show if 8M FY14 remittances are backed up by at least 10 percent year-on-year growth for each of the remaining four months (an assumption grounded in recent growth trends), Pakistan would close this fiscal year with at least $15.4 billion in remittances. If the 10.95 percent year-on-year growth shown so far in 8M FY14 is replicated in each of the remaining months, the final figure will be $15.63 billion.
In any case, the government is going to exceed its $15 billion target. As earlier highlighted in this column, both the supply and demand sides of remittances seem to be in good shape. So far, the year-on-year growth in monthly inflows is inspiring, but a $16 billion figure seems a bit far-fetched.
But, who knows, if recent rupee appreciation has no bearing on remittance inflows, full-year inflows may close in on that threshold too.
In fact, if there are any remitters who have been holding their remittances in anticipation of rupee depreciation, they may find it prudent to send their withheld amounts in March to avoid the impact of further appreciation in the rupee. An unexpected and unusual bulge in March numbers may prove that thesis.