Remittances rise to $2.72b in Aug
In line with expectations, the flow of remittances sent home by overseas Pakistanis increased 8% to $2.72 billion in August 2022 compared to July, improving outlook for the receipts in current fiscal year 2022-23.
The end of holiday season partially helped to give a boost to the inflows in August. Besides, “the export of manpower is on the rise. This should also have played a role in improving the inflows and should keep remittances steady in FY23,” pointed out Pak-Kuwait Investment Company Head of Research Samiullah Tariq while talking to The Express Tribune.
The surge in remittances, however, failed to immediately turn around sentiment – in favour of Pakistani rupee against the US dollar – in inter-bank currency dealings. The domestic currency maintained its downturn for the eighth consecutive working day, losing 0.91% (or Rs2.10) to close at a new five-week low at Rs231.92 against the greenback.
Earlier, the remittances had dropped 9% to $2.52 billion in July 2022 because of lower number of working days in the month.
Financial markets in Pakistan and the Gulf states remained closed for approximately half of the month because of Eidul Azha holidays, Hajj break in Saudi Arabia and heavy rainfall across Pakistan.
The inflow of remittances from the oil producing and exporting Gulf countries including Saudi Arabia and the United Arab Emirates (UAE) increased notably in August compared to July.
They registered a surge from the US as well. However, the inflows dropped from the recession-hit European countries including the UK, the central bank data suggested.
“Strengthening of the US dollar and weakening of the euro and pound sterling may have impacted workers’ remittances from Europe,” said Tariq.
A big chunk of remittances come from the Gulf countries, including Saudi Arabia and the UAE, where a majority of Pakistani expatriates live and work.
Remittances will remain steady at around $2.70 billion a month as Gulf economies stay healthy. Higher crude prices have lifted the Arab economies as most of them produce and export oil.
Tariq said the number of Pakistanis going abroad for seeking jobs had continued to increase since January 2022.
Earlier, the export of manpower came to a complete standstill during the peak of Covid-19 pandemic in 2020 amid a halt to international travel.
The Bureau of Emigration and Overseas Employment reported on its official website that 530,749 Pakistanis proceeded abroad for employment purposes in the first eight months (Jan-Aug) of current calendar year 2022. This translated into an average of 66,344 people going abroad each month.
In comparison, Pakistan’s manpower export stood at 288,280 in 2021, translating into 24,023 per month, according to the bureau.
“The increase in manpower export should improve workers’ remittances to around $32 billion in current fiscal year, compared to the record high of $31 billion in previous fiscal year,” the analyst said.
Remittances may not grow exponentially following the robust growth witnessed in the previous two fiscal years, he pointed out.
Cumulatively, in the first two months (Jul-Aug) of current fiscal year, the remittances were recorded at $5.24 billion. They were 3% lower compared to the $5.42 billion received in the same period of last year.
Workers’ remittances improved 1.5% in August compared to $2.68 billion in the same month of previous year, the central bank said.
Data breakdown suggested that inflows from Saudi Arabia increased 19% to $692 million in August 2022, compared to $581 million in the previous month.
Remittances from the UAE surged 17% to $531 million during the month under review compared to $456 million in July 2022.
Inflows dropped 10% from the UK to $370 million compared to $412 million in the previous month. They rose 16% from the US as they amounted to $294 million in August 2022, compared to $254 million in July.
From European countries (excluding the UK), the inflows decreased 7% to $275 million in August, compared to $294 million in July.
The flow of remittances from the remaining countries enhanced 7% to $562 million, compared to $527 million in the previous month.
With the latest drop of 0.91% on Tuesday, the rupee has cumulatively decreased 6% (or Rs13.32) in the past eight working days to Rs231.92, compared to Rs218.60 on August 1, 2022.
The rupee suffered the fresh drop after the government revised the estimate for flood losses to $40 billion, compared to the earlier assessment of $20 billion.
Tariq maintained that the demand for foreign currency remained high compared to its supply in inter-bank market. “Pakistan is required to make higher imports to overcome the shortfall in agricultural output, including cotton.”
The rupee might find support around Rs235 against the greenback under the current cycle of downturn, he concluded.