Overseas Pakistanis Rescuing Pakistan Economy Yet Again
Pakistani diaspora sent home $14.2 billion in remittances in July-December 2020, up 25% from the same period in 2019. Pakistanis settled in the United Kingdom and the United States increased their remittances by 52% and 47% respectively in this period, helping Pakistan achieve a record $1.8 billion current account surplus in the first 6 months of the ongoing fiscal year 2020-21.
|Remittances From Pakistani Diaspora. Source: Arif Habib|
While Pakistan's exports increased a modest 5.1%, the remittances from overseas Pakistanis jumped a hefty 25% in response to an appeal by Prime Minister Imran Khan who remains very popular among them. He drew nearly 30,000 Pakistani-Americans to a rally during his Washington D.C. visit in 2019.
|Pakistan Trade 1H of FY 2020-21. Source: Arif Habib|
Pakistan's imports increased 5.5%, more than the 5.1% increase in exports, during the first half of the current fiscal year 2020-21. This resulted in $12.4 billion trade deficit, a 5.9% increase. Without the 25% jump in remittances, Pakistan would most likely have a current account deficit rather than a surplus in this period.
The modest 5.1% increase in Pakistan's exports is still commendable in the midst of the global economic devastation caused by COVID19 pandemic. What is even more commendable is the 19% jump in exports in December 2020 over the same month in 2019, indicating a strong upward trend.
Pakistani diaspora is the world's 5th largest with more than half a million Pakistanis migrating every year to work overseas. Over 11 million Pakistanis have left home for employment in Europe, America, Middle East and elsewhere since 1971, according to Pakistan Bureau of Emigration. The pace has particularly picked up over the last 10 years. This phenomenon has helped reduce unemployment in a country where about 2 million young people are entering the job market each year. It has also helped remittances soar nearly 28X since the year 2000.
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The Pakistan exports of textiles have witnessed an increase of 7.7 per cent in the lead of knitted garments and hosiery during the first half of the current fiscal year of 2021 as compared to the corresponding period of last year.
Pakistan Hosiery Manufacturers Association (PHMA) zonal chairman Faisal Mehboob Sheikh and chief coordinator Adil Butt on Sunday said that the textile exports were recorded at $7.4 billion in Jul-Dec (2020-21) against the exports of $6.9 billion in Jul-Dec (2019-20), showing a growth of 7.7 per cent.
Faisal Mehboob Sheikh said that the textile commodities that contributed in positive trade growth included knitwear, exports of which increased from $1.5 billion last year to $1.8 billion during the current year, showing the growth of 16.5 per cent. He said that it is good news that country’s exports have shown positive growth for the fourth consecutive month in December 2020, which is a vindication of the government’s policy to keep the wheels of economy running during the Covid-19 pandemic. “PHMA extends congratulations to the commerce ministry and the whole nation for achieving record exports in December 2020. “Greetings also to all the hosiery exporters on achieving record exports in December 2020 with a growth of 18 per cent over the previous year, hoping the trend will continue with government full support to promote export culture.”
Faisal Mehboob Sheikh said that Pakistan’s exports of knitwear and other knitted garments and hosiery always play the leading role in exports growth, as the industry continued to show its resilience to the ongoing coronavirus pandemic. Meanwhile, on a year-on-year basis, the textile exports increased 22.7 per cent during December 2020 as compared to the same month of last year. Exports during December 2020 were recorded at $1.4 billion against the exports of $1.1 billion. On a month-on-month basis, the exports from the country witnessed an increase of 9.2 per cent during December 2020 when compared to the exports of $1.2 billion in November 2020.
Based on the figures, the country’s trade deficit also increased by 6.4 per cent during the first half compared to the corresponding period of last year. The trade deficit during the first six months of the current fiscal year was recorded at $12.4 billion against the deficit of $11.6 billion last year, which needs to be controlled through further improvement in exports.
Pakistan Hosiery Manufacturers Association chief coordinator Adil Butt observed that by showing comparatively well performance the value-added textile category has proved that it has been the main driver of growth in the country’s overall exports. He said the value-added sector achieved growth because of preferential access to the 28-nation European Union under the GSP+ scheme which can further be enhanced with the government’s support. He said that Pakistan direly needed to establish an Aggressive Marketing Plan for garment export to get maximum benefits of GSP-Plus status. Adil Butt said that apparel sector can play a leading role in earning foreign exchange and boosting exports. He suggested the government to establish a task force, especially at a time when the Chinese garment industry, which has more than 30 per cent share of the world apparel market, is relocating.
1. Consumer Price Index (CPI)State Bank of PakistanDecember 2019 – November 2020Base month: June 2019
2. Long-term Financing Facility (LTFF)
3. Quantum Index of Large-scale Manufacturing (QIM)Pakistan Bureau of Statistics
4. Trade Volume
Purchasing power has seen acontinuous decline followingthe first peak of COVID-19.o Y-o-Y inflation for Nov 2020hovered at 8.3%.
Despite inflationary pressure and the second wave of COVID-19, over a 12-month period improvements in trade volume andoutput of large-scale manufacturing coupled with a modest increase in private sector lending has resulted in an uptick in economic prosperity.
Following a dip in Aug 2020, PakistanProsperity Index continued to show anupward trend reaching an all-time high of116.3 in Nov 2020.
Improving prosperity index signals not just economic recovery but also provides a reason for optimism.
The sell-out success of the Chang’an Alsvin sedan is the latest Pakistani-Chinese joint venture to have raised eyebrows in the automotive world
Chinese car firms seeking new avenues for growth, while hampered in India, see Pakistan as an entry point to the right-hand-drive markets of South Asia
The stock-clearing sale of 15,000 Chang’an Alsvin passenger vehicles is the latest in a series of headlines about joint ventures between privately held Pakistani conglomerates and Chinese state-owned automotive enterprises.
The Alsvin is assembled at a US$136 million plant near the port city of Karachi owned by Master Chang’an Motors (MCM), established in 2017 as a 70:30 joint venture between the local Master Group and leading Chinese carmaker Chang’an Automobile. In addition to the 30,000 units a year of the Alsvin, it began producing two pick-ups and a multi-purpose vehicle in 2018.
Shanghai-based SAIC Motor, owner of the British car brand MG, this month broke ground at the site of a US$100 million plant near Karachi which is expected to begin production of three small-engined sports utility vehicles, or SUVs, next year.
KA Hanteng Motor, a joint venture with China’s Hanteng Automobile, is building a US$50 million plant in Pakistan and is expected to start making 15,000 SUVs and passenger cars this year.
Al-Hajj FAW, a Karachi-based joint venture formed in 2012, ramped up production of hatchbacks last year to 20,000 vehicles.
When the Master Group proposed the joint venture to Chang’an Automobile in 2016, it did so with the ambition of leveraging the estimated US$60 billion China-Pakistan Economic Corridor (CPEC) to gain access to other Asian markets targeted for investment under the Belt and Road Initiative, MCM’s chief executive Danial Malik said.
Exports increase 5.53pc in seven months
The exports of the country during July-January (2020-21) were recorded at $14.242 billion.
The exports from the country increased by 5.53 percent during the first seven months of the current fiscal year (2020-21) as compared to the corresponding period of last year, Pakistan Bureau of Statistics (PBS) reported Monday.
The exports of the country during July-January (2020-21) were recorded at $14.242 billion against the exports of $13.496 billion during July-January (2019-20), according to the latest PBS data.
The imports during the period under review also increased by 6.92 percent by growing from $27.316 billion last year to $29.205 billion during the first seven months of current fiscal year.
Based on the figures, the country’s trade deficit increased by 8.27 percent during the first seven months as compared to the corresponding period of last year. The trade deficit during the first seven months of the current fiscal year was recorded at $14.963 billion against the deficit of $13.820 billion last year.
Meanwhile, on year-on-year basis, the exports from the country increased by 8.11 percent during the month of January 2021 as compared to the exports of January 2020. The exports during January 2021 were recorded at $2.132 billion against the exports of $1.972 billion in January 2020, the data revealed.
The imports into the country also increased from $4.121 billion in January 2020 to $4.733 billion in January 2021, showing growth of 14.85 percent.
On month-on-month basis, the exports from the country decreased by 9.89 percent during January 2021 when compared to the exports of $2.366 billion in December 2020.
Likewise the imports into the country also decreased by 5.43 percent in January 2021 when compared to the imports of $5.005 billion in December 2020, the data revealed.
Meanwhile, the country’s services exports during the first half of the current fiscal year increased by 0.31 percent from $2.835 billion last year to $2.844 billion. Likewise, the services imports also declined by 15.68 percent from $4.532 billion during first six months of last fiscal year to $3.821 billion during the corresponding period of current fiscal year..
Based on the figures, the services trade deficit witnessed sharp decline of 42.41 percent by falling from $1.696 billion last year to $0.977 billion during the current year.
Pakistan is on track to receive record remittances this year as the overseas Pakistanis continued to send above the $2 billion inflow mark for the ninth consecutive month in February, says a latest report.
State Bank of Pakistan’s latest data shows that workers’ remittances amounted to $2.266 billion in February, reflecting a year-on-year growth of 24.2 per cent. They sent 24.1 per cent more money in February during the July-February period as remittances reached $18.7 billion.
“A large part of workers remittance inflow during July-February was sourced from Saudi Arabia [$5 billion], the UAE [$3.9 billion], the United Kingdom [$2.5 billion] and the United States [$1.6 billion],” the SBP said in a statement on Thursday.
The central bank attributed the rise in remitrances to policy measures undertaken by the government and the SBP to encourage inflows through formal channels, limited cross-border travel due to Covid-19, medical expenses and altruistic transfers to Pakistan amidst the pandemic, and orderly exchange market conditions.
Analysts said the country may receive record remittances of up to $28 billion if the similar upward growth trend continues in the second half of the fiscal year ending on June 30.
Pakistan received $23 billion in remittances during financial year 2019-20.
“Overseas Pakistanis residing in the UAE and Saudi Arabia remitted four per cent more money back home in February compared to the same month last year,” according to a research note by Arif Habib Limited.
Ratings agency Moody’s said increased remittances are credit-positive for banks and expects remittance inflows into Pakistan will increase in the coming years.
“We do not expect such high remittance growth levels to persist, but believe remittances have the potential to increase in coming years, supported by the Pakistan Remittances Initiative and technical advances that materially reduce transaction costs, particularly for remittances through electronic and official channels,” Moody’s said in a latest report.
“The increase is credit-positive for Pakistan’s banks. The increase is also contrary to our expectation that the pandemic would keep remittances flat and the World Bank’s forecast of a sharp decline in global remittances,” the ratings agency added.
Taking to his Twitter handle, Tangent Capital Advisers CEO Muzammil Aslam while citing Bloomberg data tweeted, “Pakistani rupee has been the world’s best currency against the US dollar from January 1 to March 31.”
The rupee strengthened 4.09% to Rs153.55 against the US dollar during the day since the opening level of January 1, 2021, according to the data.
Later, the rupee closed at Rs152.75 against the dollar in the domestic inter-bank market on Wednesday, Pakistan’s central bank reported.
According to data released by Bloomberg, the Canadian dollar stood at the second position among the top-performing currencies worldwide, as it appreciated 1.09% to 1.25 against the US dollar during the period under review. It was followed by the pound, which gained 0.64% against the US dollar during the same period.
“It is good to celebrate (the strengthening of rupee) but equally important is to maintain competitiveness. I am for gradual changes than abrupt,” Aslam said in his tweet.
Arif Habib Limited Head of Research Tahir Abbas, while talking to The Express Tribune, said the excessive inflow of dollars supported the rupee in maintaining the uptrend.
“The rupee may peak somewhere between Rs150 and Rs152 against the dollar under the current cycle of gains. It seems it will remain stable between Rs152 and Rs155 by the end of June 2021,” he estimated.
“In its latest move, Pakistan has successfully raised $2.5 billion through the sale of five to 30-year Eurobonds in the international market. It is backed by the resumption of International Monetary Fund (IMF) loan programme worth $6 billion,” Abbas added. Pakistan received the third loan tranche of around $500 million from the IMF on Tuesday (March 30) following the restart of the loan programme, which had been on hold since the Covid-19 outbreak in the country in February 2020.
“Going forward, the inflows are expected to continue to surge partially due to the release of remaining $4 billion later under the IMF Extended Fund Facility,” he said.
Worker remittances sent home by overseas Pakistanis have played a leading role in supporting the rupee to grow stronger during testing times of the pandemic. Besides, additional inflows from the Pakistani expatriates through Roshan Digital Account (RDA) into different assets like saving certificates, property and stock markets also kept the rupee hovering high, he said.
The analyst said the partial suspension of international travelling forced the overseas Pakistanis to send remittances through banking channels instead of sending them through people visiting Pakistan from abroad. The development helped remittances to grow during the pandemic.
The remittances grew 24% to $18.74 billion in the first eight months (July-February) of the current fiscal year 2021 compared to $15.10 billion in the same period of the last year. The RDA inflows are estimated to be above $700 million during the first six-month since its launch in September 2020. With a fresh gain of Rs0.34 on Wednesday, the rupee has gained 9.30% or Rs15.68 in the past seven-month to date since it touched a record low of Rs168.43 on August 26, 2020.
Pakistan’s foreign currency reserves have remained at around three-year highs above $13 billion for the past couple of months. They grew $275 million to $13.29 billion in the week ended March 19, 2021. The reserves would grow further with an addition of the IMF tranche worth $500 million, the $2.5 billion raised through Eurobond and other inflows from the World Bank and Asian Development Bank (ADB) in recent days.
KARACHI, Pakistan (Reuters) - Remittances of $2.7 billion in March from Pakistani workers employed abroad exceeded $2 billion for the 10th consecutive month, and were up 43% from a year earlier, the central bank said on Monday.
Proactive policy steps by the government and State Bank to spur inflows through formal channels, combined with limited cross-border travel, medical expenses and altruistic transfers amid the pandemic to fuel the rise, it said in a statement.
"The love and commitment of overseas Pakistanis to Pakistan is unparalleled," Prime Minister Imran Khan said on Twitter.
"You sent over $2 billion for 10 straight months despite COVID, breaking all records. We thank you."
The inflows came mainly from the nations of Saudi Arabia, standing at $5.7 billion; the United Arab Emirates, at $4.5 billion; with $2.9 billion from Britain and $1.9 billion from the United States, the central bank said.
by Rahila Munir, Maqbool Sial, Ghulam Sarwar and Samina Shaheen
The worker remittances are an important component of national savings, increased enormously at the rate of 30 percent per annum during the last eight years (2000-2007) and be around $ 5.5 billion by June, 2007. With higher increase in worker remittances and rate of return on deposits the level of national savings would increase more.
Prime Minister Imran Khan on Thursday terming the nine million overseas Pakistanis the country’s “biggest asset” said their remittances had kept afloat the national economy.
“By the time we achieve the required volume of exports, the remittances by overseas Pakistanis is the only way to keep our economy moving,” he said in his address at the launch of digital incentives for expatriates, including Roshan Apni Car (car finance) and Roshan Samaji Khidmat (charity).
Imran Khan said to tap the potential of overseas Pakistanis, the government was keen to maximum facilitate them through simplified online procedures of investments.
He mentioned that the country’s foreign remittances witnessed a record high level during last year, crossing the $1 billion mark.
“However, this is just the tip of the iceberg as immense possibilities lie ahead if more overseas Pakistanis divert resources towards the promising projects including the construction sector,” he said.
The prime minister lauded the efforts of the State Bank of Pakistan and the private banks for supporting the government’s initiatives aimed at facilitating the overseas Pakistanis.
He regretted that the poor economic strategies of previous governments led to difficulties in the boom and bust cycle, which directly affected the life of the common man.
He said the current account deficit devalued the rupee that put a negative impact on foreign investment.
Imran Khan in particular acknowledged the services of labour class Pakistani nationals working abroad in tough conditions and sending their hard-earned money to their families back home.
He said these workers deserved utmost respect, however expressed displeasure that the embassies of the country were not facilitating them in difficult situations. It is the duty of foreign missions to extend the best possible services to Pakistani labourers and workers, he added.
The prime minister said he had ordered a full-scale inquiry of Pakistan’s ambassador in Saudi Arabia on multiple complaints of maltreatment with Pakistani nationals. Also, the maximum staff of the embassy has been recalled.
Following a high-powered investigation, he said, strict action would be taken against those held responsible for negligence.
President State Bank of Pakistan Dr Reza Baqir said under the newly launched Roshan Apni Car scheme, the overseas Pakistanis would be one click away to digitally purchase a car for their families and friends in Pakistan on reduced mark up and delivery time.
He said Roshan Samaji Khidmat would offer a simplified model for expatriates to send charity and donations to Pakistan, including to its flagship Ehsaas socio-welfare project.
He said the government was pursuing the goal of transforming the financial system of the country to facilitate the common man.
He said the focus will be laid on the training of bank staff to amicably deal with new digital projects, resolution of land title issues and promotion of Small and Medium Term Entreprises.
Earlier, the prime minister gave away awards to best performing banks for attracting the Roshan Pakistan customers. The Meezan Bank was given the first prize, while HBL, Bank Alfalah and Habib Metro Bank bagged the next three positions, respectively.
What is worth stating, however, is that Saudi Arabia is, and will remain, the heart of Islam for the Muslims of the world, and no other country can claim such a right: That the Organization of Islamic Cooperation (OIC) is the sole representative body of 57 Muslim countries and no attempt to create an alternative Muslim bloc will ever succeed; and, of course, the fact that Saudi-Pakistan ties are well-rooted in the love and affection that their people have for each other, and hence no conspiracy can hamper their organic evolution as historic partners.
That is why the false narrative regarding the OIC’s role in Kashmir did not take hold for long. That is why the dismal portrayal of Saudi economic support for Pakistan finally failed the test of times.
Fortunately, both nations have formal and informal channels of communication to overcome any instance of grave misunderstanding or deliberate misinformation impacting their relationship.
Their bond is unbreakable as it is founded on the will of the two peoples.
Hence, the two brotherly nations have always stood shoulder to shoulder with each other in difficult times. From defending the sanctity of the two holy mosques to defeating the scourge of terrorism, Pakistan has always been a key Saudi partner.
Likewise, Saudi Arabia has never disappointed Pakistan when it is faced with hard times, be it the wave of terrorism post-9/11 or the devastating earthquake of 2005.
The two countries also closely cooperate to achieve peace and stability in Afghanistan. The current or emerging Saudi engagement in Pakistan reflects the same spirit of camaraderie with Islamic roots.
In retrospect, what the visit of Prime Minister Khan to Jeddah shows is that the relationship between Saudi Arabia and Pakistan is back to the level it was at when the crown prince visited Islamabad more than two years ago.
The decision by Saudi Arabia and the UAE to roll over $2 billion loans to next year implies the resumption of their respective financial relief packages, which Pakistan desperately needs to ward off the devastating effects of the third wave of the coronavirus (COVID-19) pandemic.
The visit is expected to kick-start work on the $20 billion Saudi development projects in Pakistan, especially the Aramco oil refinery and petrochemical complex in Gwadar.
To boost bilateral trade, a comprehensive customs cooperation accord is also reportedly on the agenda.
Moreover, General Bajwa’s almost week-long interaction with his Saudi counterparts, and the recent appointment of retired Lt. Gen. Bilal Akbar as Pakistan’s ambassador to Saudi Arabia, will ensure enhanced coordination in defense and the strategic relationship between the two countries.
In fact, this time the relationship is expected to deliver deeper cooperation beyond defense and the economy, on issues of climate change in particular.
Khan shares the vision of the crown prince as set out in the recently announced Saudi Green and Green Middle East initiatives, which align with his government’s Clean and Green Pakistan initiative.
And, luckily, this promising moment in Saudi-Pakistan ties is occurring amid a favorable turnaround in regional geopolitics, marked by the Saudi olive branch to Iran, the end of the Qatar crisis, and the India-Pakistan cease-fire in Kashmir.
These developments surely open up the diplomatic space for Saudi Arabia and Pakistan to concentrate their joint efforts for economic development and regional stability.
Inward remittance flows to South Asia rose by about 5.2 percent in 2020 to $147 billion, driven by surge in flows to Bangladesh and Pakistan. In India, the region’s largest recipient country by far, remittances fell by just 0.2 percent in 2020, with much of the decline due to a 17 percent drop in remittances from the United Arab Emirates, which offset resilient flows from the United States and other host countries. In Pakistan, remittances rose by about 17 percent, with the biggest growth coming from Saudi Arabia followed by the European Union countries and the United Arab Emirates. In Bangladesh, remittances also showed a brisk uptick in 2020 (18.4 percent), and Sri Lanka witnessed remittance growth of 5.8 percent. In contrast, remittances to Nepal fell by about 2 percent, reflecting a 17 percent decline in the first quarter of 2020. For 2021, it is projected that remittances to the region will slow slightly to 3.5 percent due to a moderation of growth in high-income economies and a further expected drop in migration to the GCC countries. Remittance costs: The average cost of sending $200 to the region stood at 4.9 percent in the fourth quarter of 2020, the lowest among all the regions. Some of the lowest-cost corridors, originating in the GCC countries and Singapore, had costs below the SDG target of 3 percent owing to high volumes, competitive markets, and deployment of technology. But costs are well over 10 percent in the highest-cost corridors.