Pakistani remittances increase nearly 4%

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Daniel Webber
Daniel Webber
Founder & CEO
Daniel is Founder and CEO of FXcompared and has 18 years of experience in the international finance world focusing on cross-border payments, technology and the property sectors. Daniel is widely… Read more
  • Money transfers from Pakistanis living abroad rose to more than $14bn over the past nine months
  • March remittances reached $1.772bn
  • Transfers from the UK and the US continue to climb

According to the State Bank of Pakistan (SBP), remittances from foreign workers increased to $14.606bn over the past nine months of the current fiscal year. This represents a 3.55% rate of growth.

In March, transfer inflows hit $1.772bn, up from $1.694bn from the same month last year.

SBP notes that remittances to Pakistan from western countries – the UK and the US in particular – show signs of steady increase, as well.

Pakistanis living in the UK sent home roughly $2.030bn from July to March FY18, a 22.45% increase. Inflows from the US reached $1.948bn, up approximately 12% from the same nine-month period in FY17.

Officials attribute the impressive growth and surge in money transfers to robust economic activity in the UK and the US, as well as low American unemployment rates.

Further impacting remittances was the recent sharp depreciation of the US dollar against the British pound, which boosted the dollar value of cash inflows from the UK.

The downward trend of remittances from Saudi Arabia – Pakistan's largest transfer corridor – continued, impacted by strict policies governing the lives of foreign workers there.

Remittances from Saudi Arabia were down to $3.690bn during July–March FY18. Expats sent $4.078bn back home over the same period in FY17.

Transfers from the UAE and Europe increased slightly, while remittances from the Gulf Cooperation Council nations experienced a decline.

The Pakistani central bank reported that these cash transfer increases are promising, yet the inflows don't go far enough to counter the current account deficit.

Analysts expect remittances from Saudi Arabia to continue their decline in the short term, as the regulatory climate for foreign workers remains tight.

"The decline in inflow may become stronger going forward, after the imposition of VAT (value-added tax) from January 1, 2018 in both KSA and UAE," said the SBP report.

The VAT will surely increase cost of living expenses for unskilled, low wage expat workers, making it more difficult for them to save or to send money abroad.

Along with the 5% VAT imposed on wholesale and retail sales, other regulatory changes expected to impact Pakistani remittances include the job nationalization drive, which looks to replace foreign workers with Saudi citizens, the repeal of the driving ban on women in Saudi Arabia, a levy on dependents, and higher taxes for companies employing highly skilled foreign workers.

The SBP predicts these changes will not only affect unskilled Pakistani workers in Saudi Arabia. A significant number of white collar expat workers may also be forced to quit their jobs and return to Pakistan permanently or send their families home to stretch their earnings further.

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