In a historic development, Pakistan has recorded an all-time high inflow of workers’ remittances, reaching $3.24 billion in May 2024. This significant surge suggests that the country’s current account balance will remain in surplus for the fourth consecutive month.
Data released by the State Bank of Pakistan (SBP) on Friday revealed that inward remittances soared by 54% compared to $2.10 billion in May 2023. The increase comes ahead of Eid Ul Azha, which falls on June 17, as expatriates traditionally send more funds home for the festival.
Financial experts were taken aback by the higher-than-expected inflows. This record surpasses the previous high of $3.12 billion received in April 2022. The remarkable growth in remittances is expected to turn the cumulative current account deficit into a surplus for the 11 months ending in May 2024, compared to a nominal deficit of $202 million in the first 10 months of the fiscal year. This influx of funds is anticipated to stabilize the country’s foreign exchange reserves and strengthen the rupee against the US dollar in the short term.
Remittances increased by 15% compared to April 2024, and cumulatively by 7.7% in the first 11 months of FY24, totaling $27.09 billion, up from $25.15 billion in the same period last fiscal year.
Shahid Ali Habib, CEO of Arif Habib Limited, commented, “With these inflows, it looks like Pakistan will record a current account surplus yet again in May 2024.” He attributed the surge to Eid, as expatriates send more funds home for festival-related expenses and to cope with inflation.
The stability in rupee-dollar parity around Rs278/$ and the narrowing gap between formal and informal currency market rates have encouraged non-resident Pakistanis to use formal channels for remittances. A central bank official highlighted significant incentives offered to banks and exchange companies to maximize inflows from overseas Pakistanis. Additionally, a crackdown on illegal currency traders has wiped out informal markets, further boosting documented remittances.
Topline Research noted that the inflows exceeded expectations, reflecting rising confidence among the Pakistani diaspora in the domestic economy ahead of securing the next International Monetary Fund (IMF) loan program.
The increase in remittances is also linked to a higher number of Pakistanis immigrating in recent years, averaging 850,000 annually in 2022-2023, compared to 323,000 between 2017-2021. Revising its projections, Topline Research anticipates full-year inflows to grow by 8-10%, reaching $29.5 billion to $30 billion in FY24, up from an earlier estimate of $28 billion.
Country-wise Remittances Breakdown
SBP’s data shows a 56% increase in remittances from Saudi Arabia, totaling $819 million in May 2024 compared to $524 million in May 2023. Inflows from the United Arab Emirates (UAE) doubled to $668 million from $336 million in the previous year.
Remittances from the UK surged by 54% to $473 million, up from $306 million in May 2023. Pakistani expatriates in the US sent $360 million, a 40% increase from $257 million in May 2023. From European Union (EU) countries, remittances grew by 36% to $340 million, compared to $249 million in the same month last year.
This historic surge in remittances is poised to bolster Pakistan’s economic stability, providing a much-needed boost to foreign reserves and the local currency.
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