By Staff Reporter
KARACHI: Remittances increased to a seven-month high of $2.5 billion in October, up 12 percent from the previous month and 10 percent from a year ago, as migrant workers sent more money home through legal banking channels, central bank data showed on Friday.
Most of the inflows came from Saudi Arabia, the United Arab Emirates, the UK and the US, which together account for more than 80 percent of the total.
The increase in remittances, which are a key source of foreign exchange for the country, comes as the International Monetary Fund (IMF) is reviewing Pakistan’s $3 billion loan programme that aims to stabilise its economy and boost growth.
Pakistan received the first $1.2 billion tranche of its IMF loan in July under the standby arrangement (SBA), and is expected to get the second tranche of $700 million in December if it meets the Fund’s targets for the first quarter of the fiscal year.
Saudi Arabia sent Pakistan the largest remittance inflows, amounting to $616.8 million in October, up 6 percent year-on-year and 15 percent month-on-month, the State Bank of Pakistan data showed. Next, the country received $473.9 million from the United Arab Emirates, an increase of 11 percent from a year ago and 19 percent from the month prior.
Remittances from the UK increased by 18 percent to $330.2 million in October, with a month-on-month increase of 6 percent.
Remittances from the United States of America increased by 8 percent to $283.3 million in October, with a month-on-month increase of 7 percent .
Remittances fell 13 percent to $8.8 billion in the first four months of the current fiscal year. The decline in remittances was driven by a slowdown in economic activity in the advanced economies of the US, Europe, and the Gulf Cooperation Council (GCC) countries, which are Pakistan’s main sources of remittances, besides higher exchange rate at black market.
Other factors that affected the remittance inflows included volatile global oil prices and fluctuating rupee exchange rate.
Analysts said the crackdown on illegal foreign exchange activities in September, which narrowed the gap between the official and the parallel market exchange rates, encouraged more expatriates to use formal channels to send money home.
The crackdown, along with other administrative measures taken by the government and the central bank, strengthened the rupee. The rupee gained almost 11 percent against the dollar in September and October.
“The convergence of interbank and open market rates alongside a crackdown against illegal channels including hawala/hundi encouraged remittances to increase by 10 percent year-on-year and 12 percent month-on-month in October, reaching their highest level since March 2023,” said Tahir Abbas, the head of research at Arif Habib Limited.
The rise in remittances and 38 percent month-on-month decline in the trade deficit to $2.09 billion in October are positive for Pakistan’s balance of payments, which has been under pressure due to a high trade deficit.
“We expect remittances to cross $30 billion in the fiscal year 2024, and the uptick will support the balance of payments,” said Mustafa Mustansir, the head of research at Taurus Securities.
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