By Staff Reporter
KARACHI: Pakistan’s remittance inflows extended a run of double-digit growth into the new fiscal year, with money sent home by overseas workers climbing 13% in July even as a regional conflict in the Middle East entered its sixth month.
The State Bank of Pakistan said Monday that workers’ remittances totalled $3.63 billion in July, up from $3.21 billion a year earlier. The gain of about $420 million extends a rebound that pushed full-year inflows to a record $41.6 billion in the fiscal year ended June, and sets the pace for a government target of $44 billion this year.
The July total also marked a 4.5% increase from June’s $3.47 billion, according to the central bank, providing an early signal that the momentum built during the last fiscal year has carried into the new one.
The persistence of remittance growth despite the war in the Middle East has drawn particular attention from currency analysts in Karachi. Saudi Arabia and the United Arab Emirates, the two largest sources of remittances to Pakistan, both posted gains even as reports circulated of Pakistani workers leaving the UAE amid the hostilities.
Inflows from Saudi Arabia rose 11% to $913.9 million in July, while UAE remittances increased by the same percentage to $737.3 million, the central bank said. Currency experts said the resilience reflects a wave of Pakistani workers relocating to the Gulf for employment even as the conflict continues, with the majority heading to Saudi Arabia.
The steepest gains came from further afield. Remittances from the UK jumped 23% year-on-year to $555.5 million, the fastest growth among Pakistan’s major corridors, while inflows from the US rose 18% to $317.2 million. Money sent from European Union countries increased 9% to $462 million.
Prime Minister Shehbaz Sharif called the July performance “highly encouraging” in a statement issued Monday, describing overseas Pakistanis as “a valuable and integral part of our national economic mainstream.”
Khurram Schehzad, adviser to the finance minister, said the July inflows build on the record set in the last fiscal year and reflect growing confidence among overseas Pakistanis in the country’s financial system. He said the central bank is targeting $44 billion in remittances for the current fiscal year, and that sustained inflows should help bolster Pakistan’s foreign-exchange position and support macroeconomic stability.
Remittances have become an increasingly important pillar of Pakistan’s external accounts, outpacing export earnings and helping the central bank rebuild reserves that remain heavily reliant on deposits from Saudi Arabia and China. Those two countries together account for more than half of the State Bank’s reserve holdings, even as the bank has stepped up its own dollar purchases in the interbank market.
Still, the remittance windfall has not been enough to offset Pakistan’s persistent trade imbalances. The country’s current account remained in deficit in the last fiscal year as a trade gap exceeding $39 billion absorbed most of the inflows. The new fiscal year has opened on a similarly weak note, with a trade deficit of $3.5 billion in July alone raising concern among economists that a weaker rupee is fueling an unsustainable rise in imports.
China’s role in that imbalance has drawn particular scrutiny. Despite Beijing’s position as Pakistan’s largest trading partner, Islamabad has been unable to narrow a trade relationship that remains heavily skewed in China’s favour, with analysts pointing to widespread under-invoicing and smuggling that have left Pakistani markets saturated with Chinese goods.
Currency analysts said they expect Pakistan to hit its $44 billion remittance target for the fiscal year, citing the durability of Gulf-based employment for Pakistani workers and continued strength across major corridors. Whether that inflow proves sufficient to stabilise the broader external account may depend on progress in narrowing the trade deficit that continues to outpace it.
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