Inflows of workers’ remittances from overseas Pakistanis remained strong, totaling $2.85 billion in September 2024, according to data from the State Bank of Pakistan (SBP). This figure brings the cumulative remittances for the first quarter of the fiscal year 2024-25 to a record $8.8 billion, marking a significant increase compared to previous years.
The robust remittance inflows are anticipated to help stabilize the Pakistani rupee, bolster foreign exchange reserves, and support the country’s import-dependent economy. They are also expected to play a crucial role in managing the current account deficit and ensuring timely repayments of maturing foreign debt.
September’s remittances represented a year-on-year growth of 29% compared to the same month in 2023. However, they showed a slight decrease of 3% from August 2024, falling below the $3 billion mark after two consecutive months of surpassing this threshold. Nonetheless, the September remittances were still above the fiscal year 2024 monthly average of $2.5 billion.
Arif Habib Limited reported that this quarterly total of $8.8 billion in remittances marked the highest ever recorded for the first quarter of a fiscal year, reflecting a 39% increase from the same period last year. The SBP attributed this surge to the stability of the Pakistani rupee and a narrowing gap between open market and interbank exchange rates, as well as an increasing number of Pakistani workers moving abroad.
Topline Securities noted that the $2.85 billion received in September was the highest amount ever recorded for that particular month. Analysts believe that these strong inflows will aid in stabilizing the rupee and addressing the current account deficit. There has also been a noticeable shift in remittance channels, with more non-resident Pakistanis choosing formal methods such as banks and exchange companies over informal hawala-hundi networks. This change is driven by better conversion rates offered through official channels. Furthermore, efforts by the government, central bank, and law enforcement agencies to crack down on illegal currency markets have dismantled networks that were smuggling foreign currency out of Pakistan.
The increasing number of Pakistanis seeking employment abroad continues to contribute to the steady rise in remittances, as expatriates regularly send money home to support their families. Analysts predict that remittance flows will remain strong, bolstered by ongoing economic growth in Middle Eastern countries where many Pakistani expatriates reside, as well as monetary easing in Western nations.
To sustain these positive remittance trends, the SBP has recently enhanced incentives for banks and exchange companies, aiming to maintain the strong inflow of remittances and their beneficial impact on the national economy.
In terms of regional contributions, remittances from Saudi Arabia, the largest source, rose by 27% year-on-year to $681 million in September 2024, up from $538 million the previous year. Inflows from the UAE surged 40% to $560 million compared to $400 million in September 2023. The United Kingdom also recorded a significant increase, with remittances climbing 44% to $424 million, up from $311 million the previous year. Similarly, inflows from the European Union grew by 35%, reaching $365 million from $270 million last year. Expatriates in the United States sent $275 million in September 2024, marking a 4% increase from $264 million in September 2023, while remittances from other Gulf Cooperation Council countries rose by 28% to $544 million, up from $425 million last year.
Despite these positive developments in remittances, the Pakistani rupee faced depreciation, closing at Rs277.72 against the US dollar in the inter-bank market, marking a decline for the third consecutive day. This decrease coincides with rising global petroleum prices, which are increasing demand for dollars for imports. However, the Exchange Companies Association of Pakistan (ECAP) reported a slight appreciation, closing at Rs279.61/$ in the open market.
This decline in the inter-bank market is unexpected, especially following Pakistan’s recent securing of $2 billion in new financing from Saudi Arabia, with expectations for further investment during a Saudi delegation’s visit. Pakistan’s foreign exchange reserves have hit a 30-month high of $10.70 billion, bolstered by the first tranche of $1.03 billion from a new $7 billion International Monetary Fund loan.
