RemittancesGateway.org

Remittances jump by 17.6pc in July-Feb

Thursday, 11 March 2010 10:10

Source: Dawn.com
By Elahe Izadi

Pakistan received 17.6 per cent higher remittances during the first eight months of the current fiscal year compared to the same period last year.

The latest figures of remittances issued by the State Bank on Wednesday showed that despite higher average remittances during the eight months, the decline was also visible on month-to-month comparison.
In February 2010, an amount of $588.78 million was sent home by overseas Pakistanis, compared with $641.32 million in the same month last year, a decline of $53 million.

Both the loss of jobs and business in the Middle East has started showing its negative impact on remittances.

Analysts said the declining remittances must be worrying for the economic managers, who depend largely on them to mitigate the fatal impact of current account deficit.

Fortunately, the current account deficit has drastically reduced during last seven months of the current year and remained just around 20 per cent of what it was during the same period of last year.

The State Bank said during the July-Feb, the remittances increased by 17.65 per cent to $5.786 billion with an addition of $868 million recorded.

The monthly average remittances for this period were $723.36 million as compared to $614.83 million during the same period of the last fiscal year. The country-wise monthly inflows show that remittances during February fell and the inflows dropped from most of the destinations, which contribute to the bulk of remittances sent to Pakistan.

Analysts said the joint initiative taken by the State Bank, and ministries of Overseas Pakistanis and finance did not produce the desired result. The joint initiative was taken during the current fiscal to tap the unused potential of remittances.

However, since the beginning of the current fiscal several factors curtailed the remittances flow. The analysts said the severe blow to the economy of Dubai during 2009, loss of business of Pakistani investors in that region and gradually shrinking job opportunities were the main reasons for lower remittances.

It was also observed that the recent rush for dollars buying in Pakistani market and dollar smuggling put pressure on local currency resulting in depreciation of rupee by 3.7 per cent in the first half of the current fiscal. It also created opportunity for speculative forces.

The difference in dollar rates between banks and the open market reached over Rs1.5 per dollar, which provided room for the transfer of money through illegal channel. Though the government took a serious note of the phenomenon, the illegal transfer of money continued to earn profits.

“Now since the dollar rates of the banks and the open market have come to the same level, I believe that illegal transactions have lost charm, which may help increase the remittance in the coming months,” said a research analyst.