Uzair bin Farid

The Kingdom of Saudi Arabia topped the list of source countries for Pakistan’s remittances during the fiscal year 2022-23. According to the Monthly Economic Update and Outlook by the Ministry of Finance, the total amount of remittances coming into the country decreased by 13.6% on a year-on-year (YoY) basis during the fiscal year 2022-23 compared to the previous fiscal year. During FY23, total remittances received by the country’s external account amounted to $27 billion, whereas during FY22, they were at $31.3 billion. The share of KSA in the total remittances stood at 23.9%, with actual remittances of $6.4 billion. KSA was followed by the United Arab Emirate (UAE) with remittances of $4.6 billion, which is 17.2% of the total.

Thereafter came the United Kingdom with total remittances of $4 billion, representing 15% of the total. UK was trailed by other GCC (Gulf Cooperation Council) countries with total remittances of $3.2 billion, equivalent to 11.8% of the total amount of remittances received during FY23. Then came the European Union with remittances of $3.1 billion, equivalent to 11.5% of the total. The EU was followed by the United States with total remittances of $3 billion. The share of remittances from the US equalled 11.4% of the total during FY23. Australia followed the US with a 2.2% share and remittances of $593 million, and was itself closely followed by Canada with a share of 2% , amounting to $550 million. Malaysia contributed only a meagre 0.4% to remittances with an actual amount of $104 million.

The rest of countries contributed the remaining 4.5% to remittances with actual sum amounting to $1.2 billion. The situation of foreign exchange reserves has improved since credit has been disbursed to the external account of Pakistan by friendly countries including the KSA, UAE, and China as well as the International Monetary Fund (IMF). As of July 12, 2023, the foreign exchange reserves held by the State Bank of Pakistan (SBP) totalled $8.8 billion. Commercial financial institutions held $5.3 billion, making the total amount of foreign exchange reserves in the country reach $14.1 billion. The fall in remittances is a concerning sign for Pakistan’s economy. Since the avenues for earning dollars to support an import-based consumption economy are already very limited for Pakistan, remittances have always propped the foreign exchange reserves of the country.

The government should continue the policy of providing convenience to  national expatriates in different parts of the world to encourage them to send more money back home. The introduction of Roshan Digital Account had exponentially increased the remittance levels in the economy. Remittances represent a very important source of foreign exchange for any economy looking to overcome its liquidity problems and support international payments. Pakistan can also manage to break the cycle of dependence on foreign lenders to support its external account by instituting healthy policies of encouraging expatriates to send money back home through legal and official channels.

Credit: INP-WealthPk