Workers remittance posted a slight decline of 2.45 percent during the first five months (July-Nov) of this fiscal year (FY17). Overseas Pakistani workers remitted $7.874 billion in July to November of FY17, compared to $8.072 billion received during the same period in the preceding year (FY16), depicting a decrease of $197 million. According to State Bank of Pakistan (SBP), on month-on-month basis, during November 2016, the inflow of worker's remittances stood at $1.616 billion, which is 3.63 percent higher than October 2016 and 3.27 percent higher than November 2015.
Pakistan had received $1.559 billion in October 2016 and $1.565 billion in November 2015. Economists said worker remittances remained a key offsetting factor within the current account, and the country's reliance on these flows has increased appreciably since FY12. During the last fiscal year, a modest growth of 6.4 percent in remittances was enough to offset 93.9 percent of the trade deficit. Despite global challenging, remittances into Pakistan passed their target and reached almost $20 billion in FY16.
The SBP, in its recent report, has mentioned that external developments have been largely unfavourable for cross-border remittances over the past two years. These mainly include worsening in fiscal profiles of Gulf governments in an era of low oil price and secondly tepid economic growth in the developed world as well as tightening regulations governing international fund transfers.
Looking at major remittance corridors for Pakistan indicates that the steep fall in oil prices has pushed many GCC states into a fiscal consolidation mode. While, most GCC states responded by drawing down on their sizable foreign exchange reserves, reducing subsidies, and cutting down their overall spending, some also resorted to international capital markets and issued sovereign debt, it added.
From Pakistan's perspective, the slowdown in inflows from Saudi Arabia is obviously worrisome. There was ample anecdotal evidence earlier on that Pakistani workers were facing delayed salaries and visa-related issues, it has recently been confirmed officially that thousands of workers, employed at two Saudi companies, are stranded in that country.
According to SBP, granted that the number of affected workers might appear quite small when compared with the size of the Pakistani living there, the extent of slowdown in remittances from Saudi Arabia indicates that there might be more Pakistani workers who are also facing similar challenges.
Meanwhile, the country-wise details revealed that remittances from USA and UK fell 10.52 percent and 14 percent to $981.37 million and $912.6 million, respectively during first five months of this fiscal year. During the period under review, with 5.6 percent decline, Pakistan received some 2.259 billion remittances from the Saudi Arabia, which is the largest contributor to home remittances.
Remittances from UAE and GCC countries shrank by 3 percent and 1.24 percent to $1.779 billion and $951 million in July-November of FY17. However, inflows of home remittances from the EU countries sharply increased by 24 percent to $195 million. The country-wise details for home remittances in November 2016 showed that inflows from Saudi Arabia, UAE, USA, UK, GCC countries (including Bahrain, Kuwait, Qatar and Oman) and EU countries amounted to $465.19 million, $362.71 million, $193.98 million, $192.8 million, $193.12 million and $37.03 million, respectively compared with the inflow of $488.29 million, $350.84 million, $192.39 million, $191 million, $191.46 million and $31.64 million, respectively in November 2015. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during November 2016 were $171.60 million together against $119.57 million received in November 2015.