Editorial
According to data released by the State Bank of Pakistan (SBP) on Friday, overseas workers sent home $3.1 billion in remittances in October 2024, a remarkable 23.9% increase from $2.46 billion during the same month last year.
Month-on-month, remittances rose by 6.7% from $2.86 billion in September 2024. For the first four months of the fiscal year, total remittances surged nearly 34.7% year-on-year to $11.8 billion, up from $8.8 billion in the same period last year.
Analysts believe this rise is attributed to a stable exchange rate, a reduced gap between open market and inter-bank rates, the growth of digital payment options, and more workers moving abroad.
In October 2024, Saudi Arabia led the way as the largest source of remittances, contributing $766.7 million, which is a 12% increase from September and a 24% rise from $616.8 million in October 2023.
Remittances from the UAE also saw a significant month-on-month increase of 10%, going from $562.7 million in September to $620.9 million in October, and jumped 31% compared to $473.9 million last October.
Payments from the UK reached $429.5 million, a slight 1% increase from September’s $424.1 million, and a notable 30% rise year-on-year. However, remittances from the European Union experienced a 2% decline, amounting to $359.1 million in October compared to $365.5 million in September. Conversely, inflows from the US increased by 8% month-on-month, reaching $299.3 million in October.
To further enhance remittances, the SBP has recently adjusted its incentive programs for banks and money exchange companies, introducing new fixed and variable components to encourage higher inflows.
Despite a slow start in 2023 due to economic uncertainties and exchange rate discrepancies, remittance inflows have been recovering since March 2024, averaging about $3 billion per month and peaking at $3.2 billion in May. These remittances are vital for Pakistan’s economy, particularly in light of the sluggish performance of exports.
Remittances serve as a crucial source of foreign exchange reserves, with a report from Insight Securities noting steady growth over the past two decades, which has helped mitigate the effects of a rising trade deficit and bolstered the balance of payments.
The increase in remittances not only supports many households but also stimulates domestic consumption, benefiting various sectors of the economy.
Pakistan has faced severe economic challenges, including record inflation and a risk of sovereign default last summer, before receiving a $3 billion bailout from the International Monetary Fund (IMF). Following the successful conclusion of a nine-month IMF arrangement in April, macroeconomic stability has improved. Inflation has eased, and credit ratings agency Moody’s upgraded Pakistan’s ratings due to better macroeconomic conditions.
The introduction of a new, larger, and longer-term IMF loan program aims to maintain this stability. The current account deficit has remained manageable, bolstered by strong remittances and improved exports.
After receiving the first tranche of $1.03 billion from the $7 billion IMF loan, the central bank’s forex reserves rose to $10.7 billion as of September 27, enough to cover more than two months’ worth of imports.
