Threats for foreign remittances?

Remittances have been flourishing year after year. The receipts from overseas Pakistanis as per central bank’s data continued to remain upbeat reaching the level of $13.327 billion during the first nine months of FY15, depicting a growth of 15 percent year-on-year. And the remittances touched $1.577 billion in March 2015, recording a growth of 13.3 percent over last year.

Like the oil prices didn’t bring any immediate slowdown in home remittances, the crisis between Yemen and Saudi Arabia might not prove a bottleneck in the short term. In March 2015, receipts from Saudi Arabia increased by 15 percent year-on-year to $489.7 million, while the month-on-month increase corresponded to eight percent rise. Foreign receipts of $411 million from UAE and $196 million from other GCC countries showed a year-on-year growth of 57 percent and 20 percent, respectively. Similarly, there were no signs of slowing down remittances from these countries as the month-on-month changes show an increase of 30 percent and 19 percent, respectively.

Experts have ruled out a significant impact on home remittances from the ongoing crisis in Yemen as long as it remains within Yemen. However, the alarm bells should ring if this crisis spreads across the Middle East and results in displacement of people – in this case Pakistanis working in the region - impacting remittances; GCC countries are the source of about two third of Pakistan’s total remittances, half of which comes from Saudi Arabia.

At the same time, analysts and experts are hoping that the next moth would bring on copious receipts as returning immigrants of Yemen would be bringing home their savings in this time of uncertainty.

One threat for remittances in Pakistan is the prolonging and the spreading out Yemen crisis to other GCC countries including Saudi Arabia. 

Another external vulnerability highlighted by IMF in the sixth review of the extended finance facility is the protracted period of slow growth in key advanced and emerging economies that could impair exports and hurt remittances. The Fund also warns about the risk of the GCC countries decelerating and further reducing the windfall from the oil price plunge, which will impact foreign inflows from Pakistani diaspora.