According to statistics released by the State Bank of Pakistan (SBP) on Monday, a decrease in remittances has been observed for the first time in 13 years.
There was a 3.08% decrease in remittances in the last fiscal year which amounts to $19.3 billion. This decrease has started to threaten the already weakened economy of the country. Although at this time, this decrease does not have that much significance, but the year-on-year decrease in remittances will surely damage the economy.
For over a decade, remittances have always showed an increase. Moreover, even with the decrease in oil prices, inflows still showed an increase of 6.36% in the fiscal year 2015-16. Due to the decrease in oil prices, remittance received from the Gulf region in total inflows came down to 62.6% as compared to 64% in the previous year. The decrease in oil prices also led to low remittance as thousands of Pakistanis lost their job in that particular sector.
Decrease in trade deficit
The trade deficit of Pakistan also received a blow to the head as there was a great decrease in exports and at the same time, an even greater increase in imports. For the past five years, the growth in remittances has been covering up the decrease in trade deficit however, now remittances are also facing a decline. Trade deficit has been decreasing on a year-on-year basis. Previously, it was reported to be $8.9 billion and has increased to $10.6 billion during the period of July-May 2017.
The gap between the trade deficit recorded recently is said to be the double of the gap recorded in the first 11 months of the previous fiscal year altogether. The current account deficit is expected to reach an amount of $12 billion. This huge increase in account deficit might have a great negative impact on the foreign exchange reserves and has the power to destabilize the exchange rate regime.
According to country-wise date, the major decrease in remittances has been recorded from Saudi Arabia from where remittances fell to $5.49 billion resulting in an annual decline of 8.35%. Other than that, remittances decreased from the US and the UK too. Remittances received from the United Kingdom showed a decrease of almost 9.36% which amounts to $2.33 billion. Inflows from the United States declined 3.2% to $2.44 billion against a decrease of 6.58% recorded in 2015-16. A decrease of 3.2% in remittances from the United States was also recorded. Moreover, remittances from the UAE also decreased as they fell to $4.3 billion amounting to a decrease of 1.27%. A 4% decrease in inflows from other countries including the Gulf Cooperation Council was also recorded.