Business - Record Pakistan remittances likely to bridge trade gap
M. Aftab / 25 May 2015
Millions of overseas workers may send $19b back home in fiscal 2015.
Home remittances sent by millions of overseas Pakistanis are heading to a historic high of $19 billion as fiscal 2015 gets to its close on June 30. The inflow of remittances has upped all estimates and the past record of increases. The projected uptrend is, additionally, based on the customary large inflow of remittances during the forthcoming holy month of Ramadan and the Eid Al Fitr festival when more cash is normally sent to the dependents, or the Pakistanis return home for the festival.
Even normally bullish Finance Minister Ishaq Dar privately projects the inflow at $18.5 billion by end-June.
But the State Bank of Pakistan (SBP), the central bank, has just raised the Pakistani currency companies’ spread to up to one per cent between buying and selling of major foreign currencies. Will this decision effect the currency business? It is yet to be seen. The SBP-set spread rate, so for, was Rs0.25. Most of the currency companies, however, were enjoying a spread of up to Rs0.50, so for.
SBP announcement said: “The spread between buying and selling rates of the US dollar, pound sterling, euro, Saudi riyal and the UAE dirham will not exceed one per cent of their buying rate. For all other foreign currencies, exchange companies will ensure to maintain a competitive spread.”
“It must be ensured that the prevailing exchange rates, applicable to sale or purchase of major foreign currencies are displayed through notice or display board at a prominent place in each of the outlets of the exchange company. Daily report being submitted to the Exchange Policy Department, may be discontinued,” SBP also said.
Zafar Paracha, Secretary of Exchange Companies Association of Pakistan (ECAP), said: “State Bank of Pakistan has taken the decision on the demand of the exchange companies.”
Anwar Jamal, appreciating the SBP decision said: “It was the demand of the exchange companies to remove the restriction of Rs0.25 spread but we cannot deny that they will earn higher profits.”
What is the quantum of the inflow? The Overseas Pakistanis sent home $14.969 billion during the first ten months — July-April of FY-15 that ends on June 30. The amount was higher by 16.06 per cent as compared to the like period of FY-14 when it was $12.897 billon. SBP has projected a rising trend and the total inflow to reach a level of $16.5 to 17.5 billion by June 30. The remittances are a key source of foreign exchange income as they help reduce the country’s current account deficit, pay a big part of the import bill, and maintain stability of the rupee.
The Pakistani currency has fluctuated at around Rs101 to a dollar since January this year. It was trading at Rs102.60 for buying and Rs103.20 for selling to a dollar over the weekend. The inflow from the Arab countries, altogether, rose to $9.7 billion in the first 10 months of FY-15 — which means 64.8 per cent of all remittances. The remittance from Saudi Arabia rose 19.94 per cent to $4.565 billion from $3.806 billion during the first ten months of FY-15 compared to the like period of FY-14. Ministry of Manpower and Overseas Pakistanis attributes the growth to “more Pakistanis finding jobs in Saudi Arabia”. The UAE provided $3.384 billion — up 34 per cent from $2.522 billion. The inflow from the GCC countries rose 14.6 per cent at $1.751 billion.
The remittances from US were 3.8 per cent and UK 2.6 per cent. Inflow from EU has recorded a negative growth of 16 per cent as the amount declined to $298 million from $355 million in the like period of last year.
Besides the current income inflows of remittances, there is a vast potential to raise funds from the Pakistani diaspora working abroad. It included attracting their savings into various forms of investment in Pakistan and issuing bonds for the Overseas Pakistanis. This is advised by the World Bank in its recent report on Global Migration and Development. It said: “The developing countries received $436 billion from their diaspora in 2014 in the form of home remittances. But they can raise another $100 billion if they can tap into dispora savings which, estimated at $497 billion in 2013, and which are maintained abroad in their current and savings accounts, or invested in other bank and financial products.
The World Bank quoted Islamabad-based Pakistan Institute for Development Economics (PIDE) Paper, which said: “As of 2012 over 40 per cent of Pakistan’s total migrant stock of 6.7 million is estimated to be living in the rich regions like US, UK, Europe, Australia and other developed countries. The overall savings of the Pakistani diaspora have not been estimated, but these must be higher than those of Bangladesh, which are nearly $10 billion. It suggests that among other financial instruments, Pakistani diaspora can be asked to invest in Pakistan Diaspora Bonds, which should also be available to all investors and persons of other nationalities. The World Bank suggests a five-year bond may offer three-four per cent annual yield. The inflow from these bonds can be invested in energy, infrastructure and other development projects.
Alongside the good news of the higher remittances inflow, Federal Bureau of Statistics (FBS) reported, the country’s foreign trade deficit widened to $17.92 billion in July-April, 10-month period of FY-15. The exports were $19.92 billion. The imports totalled $37.95 billion. The remittances, in this sad foreign trade scenario, are footing an ever-growing share of the widening trade deficit. The trade deficit in FY-15, so for, is 11.28 per cent wider than last year. The exports stay stagnant because of a somewhat over-valued rupee.
But, still no reason for gloom. If trade balances are not presenting a very happy picture, remittances and other inflows will go on expanding so long hard as working Pakistanis abroad are sending lots of cash.
M. Aftab / 25 May 2015
Millions of overseas workers may send $19b back home in fiscal 2015.
Home remittances sent by millions of overseas Pakistanis are heading to a historic high of $19 billion as fiscal 2015 gets to its close on June 30. The inflow of remittances has upped all estimates and the past record of increases. The projected uptrend is, additionally, based on the customary large inflow of remittances during the forthcoming holy month of Ramadan and the Eid Al Fitr festival when more cash is normally sent to the dependents, or the Pakistanis return home for the festival.
Even normally bullish Finance Minister Ishaq Dar privately projects the inflow at $18.5 billion by end-June.
But the State Bank of Pakistan (SBP), the central bank, has just raised the Pakistani currency companies’ spread to up to one per cent between buying and selling of major foreign currencies. Will this decision effect the currency business? It is yet to be seen. The SBP-set spread rate, so for, was Rs0.25. Most of the currency companies, however, were enjoying a spread of up to Rs0.50, so for.
SBP announcement said: “The spread between buying and selling rates of the US dollar, pound sterling, euro, Saudi riyal and the UAE dirham will not exceed one per cent of their buying rate. For all other foreign currencies, exchange companies will ensure to maintain a competitive spread.”
“It must be ensured that the prevailing exchange rates, applicable to sale or purchase of major foreign currencies are displayed through notice or display board at a prominent place in each of the outlets of the exchange company. Daily report being submitted to the Exchange Policy Department, may be discontinued,” SBP also said.
Zafar Paracha, Secretary of Exchange Companies Association of Pakistan (ECAP), said: “State Bank of Pakistan has taken the decision on the demand of the exchange companies.”
Anwar Jamal, appreciating the SBP decision said: “It was the demand of the exchange companies to remove the restriction of Rs0.25 spread but we cannot deny that they will earn higher profits.”
What is the quantum of the inflow? The Overseas Pakistanis sent home $14.969 billion during the first ten months — July-April of FY-15 that ends on June 30. The amount was higher by 16.06 per cent as compared to the like period of FY-14 when it was $12.897 billon. SBP has projected a rising trend and the total inflow to reach a level of $16.5 to 17.5 billion by June 30. The remittances are a key source of foreign exchange income as they help reduce the country’s current account deficit, pay a big part of the import bill, and maintain stability of the rupee.
The Pakistani currency has fluctuated at around Rs101 to a dollar since January this year. It was trading at Rs102.60 for buying and Rs103.20 for selling to a dollar over the weekend. The inflow from the Arab countries, altogether, rose to $9.7 billion in the first 10 months of FY-15 — which means 64.8 per cent of all remittances. The remittance from Saudi Arabia rose 19.94 per cent to $4.565 billion from $3.806 billion during the first ten months of FY-15 compared to the like period of FY-14. Ministry of Manpower and Overseas Pakistanis attributes the growth to “more Pakistanis finding jobs in Saudi Arabia”. The UAE provided $3.384 billion — up 34 per cent from $2.522 billion. The inflow from the GCC countries rose 14.6 per cent at $1.751 billion.
The remittances from US were 3.8 per cent and UK 2.6 per cent. Inflow from EU has recorded a negative growth of 16 per cent as the amount declined to $298 million from $355 million in the like period of last year.
Besides the current income inflows of remittances, there is a vast potential to raise funds from the Pakistani diaspora working abroad. It included attracting their savings into various forms of investment in Pakistan and issuing bonds for the Overseas Pakistanis. This is advised by the World Bank in its recent report on Global Migration and Development. It said: “The developing countries received $436 billion from their diaspora in 2014 in the form of home remittances. But they can raise another $100 billion if they can tap into dispora savings which, estimated at $497 billion in 2013, and which are maintained abroad in their current and savings accounts, or invested in other bank and financial products.
The World Bank quoted Islamabad-based Pakistan Institute for Development Economics (PIDE) Paper, which said: “As of 2012 over 40 per cent of Pakistan’s total migrant stock of 6.7 million is estimated to be living in the rich regions like US, UK, Europe, Australia and other developed countries. The overall savings of the Pakistani diaspora have not been estimated, but these must be higher than those of Bangladesh, which are nearly $10 billion. It suggests that among other financial instruments, Pakistani diaspora can be asked to invest in Pakistan Diaspora Bonds, which should also be available to all investors and persons of other nationalities. The World Bank suggests a five-year bond may offer three-four per cent annual yield. The inflow from these bonds can be invested in energy, infrastructure and other development projects.
Alongside the good news of the higher remittances inflow, Federal Bureau of Statistics (FBS) reported, the country’s foreign trade deficit widened to $17.92 billion in July-April, 10-month period of FY-15. The exports were $19.92 billion. The imports totalled $37.95 billion. The remittances, in this sad foreign trade scenario, are footing an ever-growing share of the widening trade deficit. The trade deficit in FY-15, so for, is 11.28 per cent wider than last year. The exports stay stagnant because of a somewhat over-valued rupee.
But, still no reason for gloom. If trade balances are not presenting a very happy picture, remittances and other inflows will go on expanding so long hard as working Pakistanis abroad are sending lots of cash.
