For the first time in 13 years, remittances recorded a year-on-year drop in 2016-17, data released by the State Bank of Pakistan (SBP) showed on Monday.
Remittances declined 3.08 per cent to $19.3 billion in the last fiscal year, sending a warning signal to the government that already faces tough challenges on the external front.
In absolute terms, the decline of $613 million does not seem to be significant. But the year-on-year drop marks a change in the long-term trend as remittances kept increasing for well over a decade. Inflows recorded a growth of 6.36pc in 2015-16 even though the oil price crisis was at its peak.
Thousands of Pakistanis lost their jobs in the oil-rich Gulf region when oil prices nosedived and led to low remittances. In 2016-17, the share of remittances from the Gulf region in total inflows fell to 62.6pc from 64pc a year ago.
Inflows decreased 3pc to $19.3bn in 2016-17
Growing remittances played a key role in bridging the trade deficit as imports rose and exports fell during the last five years. In particular, 2016-17 was an extremely difficult year for the government as it faced record-high trade and current account deficits along with declining exports. Revised figures for the current account deficit issued on July 5 further worsened the external account.
The revised current account deficit for July-May is $10.6bn, up $1.7bn from the previously reported figure of $8.9bn. It is more than double the gap recorded in the first 11 months of the preceding fiscal year. Analysts believe the current account deficit for 2016-17 can widen up to $12bn.
The huge current account deficit is likely to affect foreign exchange reserves and can destabilise the exchange rate regime.
The exchange rate recently received a shock of 3.1pc devaluation, but the government managed to contain the slide in the rupee’s value to 2pc.
Country-wise data shows a major decline in remittances from Saudi Arabia. They fell $472m to $5.49bn, translating into an annual decline of 8.35pc.
Remittances decreased from almost all important sources, including the United States and United Kingdom. Inflows from the United States declined 3.2pc to $2.44bn against a decrease of 6.58pc recorded in 2015-16. Remittances from the United Kingdom posted a decline of 9.36pc and amounted to $2.33bn.
Remittances from the United Arab Emirates fell 1.27pc to $4.3bn. Inflows from other countries of the Gulf Cooperation Council declined 4pc to $2.32bn.
Oil prices and the political situation are still volatile in the Middle East, which can hurt job opportunities for Pakistani workers.
