Eid and charity for Covid helped
Pakistanis overseas sent back the highest ever amount in April: $2.78 billion. In the ten months of this financial year, remittances have crossed $24 billion, which is 16% higher than what exports earned ($20.8 billion).
“Curtailed cross border travel in the face of COVID-19, philanthropic transfers to Pakistan amid the pandemic, orderly foreign exchange market conditions and, more recently, Eid-related inflows have contributed to record levels of remittances this year,” the State Bank said. It also attributed the improvement to proactive policy measures by the government and itself to encourage more people to send money through formal channels.
The foreign exchange overseas Pakistanis send back is known as worker remittances or just remittances. The money mostly came from Saudi Arabia ($6.4 billion), the United Arab Emirates ($5.1 billion), the United Kingdom ($3.3 billion) and the United States ($2.2 billion).
Remittances sent in April this year were 56% higher as compared to April 2020. On a cumulative basis, remittances have reached a record high of $24.2 billion in fiscal year 2020-21 so far (July to April), which is 29% more than the same period last year. They have already crossed the full fiscal year 2019-20 level by more than $1 billion.
“Remittances have an important role in making the dollar rate to fall,” said Zafar Paracha of the Exchange Companies Association of Pakistan. “Remittances has been playing role similar to that of exports for Pakistan.”
Paracha said that the increase in remittances just like exports improves general public or business sentiment, which in turn lowers demand for the dollar.
“People think that the dollar rate will fall as remittances will support foreign exchange reserves,” he explained. “Exports and remittances are the two solid sources of income for the country. Investments can come and go.”
A falling dollar rate also means lowered debt in rupee terms.
Exports have also been reported above $2 billion for seventh consecutive month till April, which has happened for the first time since 2011.