KARACHI: In a positive development, remittances posted their biggest jump in years for the month of July, rising by 25 per cent compared to the same month last year despite the raging uncertainty that prevailed in the run-up to the elections.
The State Bank of Pakistan (SBP) reported on Friday that the overseas Pakistani workers remitted $1.93 billion in the first month of 2018-19 as compared to $1.54bn received last July.
Similarly, month-on-month growth in remittances was 21pc higher than the June figure this year.
The news comes as darkening clouds gather on the horizon amid depleting foreign exchange reserves and mounting current account deficit, driving talk of bailouts and another possible approach to the International Monetary Fund. Remittances are the backbone of the external sector with their size close to the total exports of the country.
Pakistan received $19.6bn remittances in total in FY18 and have been on the uptick since January, but the July data sees the largest jump seen in years.
Whether it proves fleeting or evidence of a rebound in one of the principal foreign exchange earners of the country remains to be seen in forthcoming months. Currency dealers attributed the surge to various factors, saying the general elections could have acted as a trigger for people to bring money back to meet election expenses, as well as funds returning to Pakistan under the amnesty scheme might have been included the data. No firm answers are available for the unusually large jump.
The increase appears to be broad based, with three countries – the USA, UK and UAE – showing double digits growth. Remittances from UAE soared by 29.5pc to $433 million and from Gulf Cooperation Council countries by 3.8pc to $199m.
Remittances from the entire Middle East have witnessed an increase, including Saudi Arabia which has been showing decline for the last couple of years. Inflows from the kingdom grew by 7pc to $427m in July FY19.
The largest jumps were seen from the USA and UK, higher by 44pc and 39pc to $280m and $277m respectively.
The inflow from UAE grew by 24pc to $65m in July FY19.
General elections greatly affected the exchange rate in the country. The day after polling (July25), the dollar fell and the local currency gained substantially against the greenback — an unusual trend that currency dealers attributed to panic selling of hoarded dollars after the results became known.
Within three days, the dollar lost about 3.2pc against the rupee in the interbank market. The greenback is still losing inch by inch in the interbank market but it has yet not settled in the open market.
The surplus dollar in open market lost attraction and exchange companies have been making money with a margin of up to Rs3 per dollar but the prevailing rates are lower than the interbank market.