Workers' remittances continued to stay above $2 billion for a record 13th consecutive month, with an inflow of $2.7 billion received in the last month of the fiscal year 2020-21, said the State Bank of Pakistan (SBP) on Tuesday.
On a cumulative basis, remittances amounted to a historic high of $29.4 billion during the fiscal year, a 27% year-on-year increase. The growth in FY21 is the highest since FY03.
"This has helped improve the country’s external sector position despite the challenging global economic conditions in the past year," said the central bank, adding that the seasonal pre-Eid-related inflows helped further boost remittances during June.
SBP reintroduces incentive scheme for marketing of home remittances
Country-wise, remittance inflows during FY21 were mainly sourced from Saudi Arabia ($7.7 billion), United Arab Emirates ($6.1 billion), United Kingdom ($4.1 billion), and the United States ($2.7 billion).
The central bank was of the view that the record-high inflow of workers’ remittances during FY21 has been driven by proactive policy measures by the government and the SBP to incentivise the use of formal channels, curtailed cross-border travel in the face of Covid-19 infections, altruistic transfers to Pakistan amid the pandemic, and orderly foreign exchange market conditions.
Last week, Pakistan, in order to ease inflows and further encourage the promotion of home remittances through formal/ legal channels, approved the reintroduction of the Incentive Scheme for Marketing of Home Remittances with effective from July 01, 2021 to June 30, 2022, to improve remittance performance for FY22.
Current account posts massive $632m deficit in May 2021
Remittances play a vital role in Pakistan's economy, which continues to battle rising external debt and a high current account deficit. The country’s current account posted a massive $632-million deficit in May 2021 compared to a surplus of $329 million recorded in May 2020, in what becomes the highest monthly deficit after December 2019.
The SBP had said that the current account deficit came on the back of lower exports that decreased due to partial lockdowns imposed during the month and long Eid holidays in May.