Lahore – Staff Reporter:
Remittance flow into Pakistan increased by about 17 per cent in 2020, defying the gloomy projections and in spite of the global Covid-19 pandemic.
The growth in the home remittances from Pakistanis working abroad last year was much faster than 5.2pc increase in flows to the South Asian countries, according to the latest Migration and Development Brief published by the World Bank.
Previously, the bank had forecast significant decline in remittances to Pakistan and the rest of the countries in the region because of the coronavirus pandemic that forced nations across the world to lock down their economies and send migrant workers back home to their countries of origin.
The biggest growth in remittances flow into Pakistan came primarily from Saudi Arabia followed by the European Union (EU) countries and the United Arab Emirates.
Analysts believe that restrictions on international travel — for both leisure and religious purposes — because of the pandemic, FATF-related curbs on illegal cash transfer through informal or illegal channels, and incentives offered by the central bank to overseas Pakistanis using banking channels to remit their savings have driven growth in remittances in spite of impacts of the Covid-19 crisis on the economies in the host countries.
Additionally, the Roshan Digital Account initiative of the State Bank of Pakistan, which allows overseas Pakistanis to digitally open a bank account with local banks for online stock market and real estate investments, has helped attract more than $1 billion into the country in the last seven months.
The rising remittance flow has helped the central bank prop its foreign exchange reserves to a record high, supporting current account that has posted a surplus of over $945 million in the first three quarters of the current financial year.
The increase in remittances during the last few months has been faster than ever before and some foreign exchange companies claim that the flow has risen at least by 20pc or more during Ramazan. Exchange Companies Association of Pakistan chairman Malik Bostan said the Ramazan flows would push the total monthly remittances to the range of $2.8bn to $3bn.
The flow during Ramazan usually increases by 20pc every year on higher amount sent to families, including Zakat and donations.
The World Bank report suggests that the main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in the host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates.
The true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data, though the extent of the impact of Covid-19 on informal flow is unclear.
South Asia remains one of those regions – including Latin America and Caribbean and the Middle-East and North Africa – where remittances have registered growth while the flows declined in the rest of the world.
In addition to Pakistan, inward remittances to South Asia were driven by Bangladesh and Sri Lanka. In Bangladesh, remittances showed a brisk uptick of 18.4pc and Sri Lanka witnessed remittance growth of 5.8pc.
In India, the region’s largest recipient country by far, remittances fell by just 0.2pc, with much of the decline due to a 17pc drop in remittances from the UAE, which offset resilient flows from the United States and other host countries.
The remittances to Nepal also slightly fell by about 2pc.
Overall, South Asia received total remittances of $147bn last year, which the World Bank has again predicted to slightly slow from last year’s 5.2pc to 3.5pc in 2021 owing to a moderation of growth in high-income economies and a further expected drop in migration to the Gulf countries.
The average cost of sending $200 to the South Asian region stood at 4.9pc in the fourth quarter of 2020, the lowest among all the regions. Some of the lowest-cost corridors, originating in the Gulf countries and Singapore, had costs below the Sustainable Development Goals target of 3pc owing to high volumes, competitive markets, and deployment of technology. But costs are well over 10pc in the highest-cost corridors.
Globally, remittance flows remained resilient in 2020, registering a smaller decline than previously projected. Officially recorded remittance flows to low- and middle-income countries reached $540bn or just 1.6pc below the 2019 total of $548bn.
The decline in recorded global remittance flows last year was smaller than the one – 4.8pc – during the 2009 global financial crisis. It was also far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries, which, excluding flow to China, fell by over 30pc in 2020. As a result, remittance flows to low- and middle-income countries surpassed FDI of $25bn and overseas development assistance of $179bn.