Pakistan’s remittances during the first seven months of FY22 reached a record high of $18 billion, which is a 9.1 per cent increase compared to the remittances received in the same period of last year.
Remittances have maintained the record high level, despite a 15 per cent decrease during January 2022 compared to December 2021. Total remittances during January 2022 were recorded at $2 billion.
The decline in remittances received in January 2022, is mainly due to reduced income inflows from the Middleeast, European Union, and USA.
Moreover, remittances received in January 2022 were also 5 per cent lower compared to remittances received in January 2021.
Some analysts correlate the decline in remittances to the recent easing of travel restrictions, which is likely to have resulted in more expats traveling to Pakistan instead of wiring money.
Director Research Pak-Kuwait Investment Company, Sami Tariq, explained that the remittances were previously higher because, ‘During the previous months physical travel was limited. In the last month, physical travel to UAE and Saudi Arabia has gained traction which has enabled overseas Pakistanis to bring physical dollars and has reduced dollar inflow in the banking system.’ He also cited anti-money laundering efforts by the government as one reason.
On the other hand, while Pakistan’s remittances declined by 15% in January 2022 compared to December 2021, Bangladesh experienced a 5 per cent increase during the same period with its January 2022 remittances standing at $1.7billion.
The larger part of remittances coming into Pakistan are from the Gulf countries, among which Saudi Arabia, and then the United Arab of Emirates have the highest shares. This trend was upheld as remittance inflows during January 2022 were mainly sourced from Saudi Arabia ($540 million), United Arab Emirates ($374 million), United Kingdom ($320 million) and United States of America ($208 million).
So, what significance do remittances hold for Pakistan and how does it contribute to the economy?
Remittances are recorded as the transfer of income from Pakistani migrants living abroad to locally-held accounts and short-term employee income transfers (personal remittances). Remittances make up a considerable part of Pakistan’s economy as it adds to the foreign exchange reserve and lowers the current account deficit.
For these reasons, the current government and the SBP have been invested in trying to promote overseas remittances. This includes initiatives taken to incentivise remittances inflow by authorising banks to allow transactions through foreign correspondence entities, promising paid incentives for mobile wallet use for transaction of remittances, incentives for banks to achieve the target for bringing in 15 per cent more remittances than the previous year, and others.
