ISLAMABAD  -  Pakistan’s remittances inflows remained above $2 billion for the fifth consecutive month in October 2020, which would help in controlling the current account deficit of the country.

“Workers’ remittances remained above $2 billion for the fifth consecutive month in October 2020,” said State Bank of Pakistan (SBP) on Thursday. It added that workers’ remittances amounted to $2.3 billion during October 2020, increasing by 14.1 per cent compared to October 2019. Meanwhile, workers’ remittances increased to $9.4 billion in first four months (July to October) of the current fiscal year, recording a growth of 26.5per cent over the same period last year.

“A large part of YoY increase in October 2020 was sourced from Saudi Arabia (30 per cent), United States (16 per cent) and United Kingdom (14.6 per cent). Improvements in Pakistan’s FX market structure and its dynamics, efforts under the Pakistan Remittances Initiative (PRI) to formalise the flows and limited cross-border travelling contributed to the growth in remittances,” said SBP.

The increase in remittances would help in improving the current account deficit, which is already in surplus. Earlier, in September 2020, Current Account remained in surplus ($73 million) for third consecutive month; it was last happened in 2004. Thus, Current Account posted a surplus of $792 million (1.2 per cent of GDP) during first quarter (July to September) of the current fiscal year (FY2021) against a deficit of $1492 million last year (2.3 per cent of GDP).

Exports have also helped in Current Account Surplus. On monthly basis, exports increased by 29.2 per cent to $1.95 billion during September 2020 as compared with $1.5 billion in August 2020. Meanwhile, on annual basis, exports increased by 3.8 per cent to $1.95 billion during September 2020 as compared with $1.879 billion in September 2019 while exports during Q1 FY2021 decreased by 10.5 per cent to $5.358 billion as against $5.985 billion last year. The massive increase in remittances would improve the value of local currency.

World Bank report had recently projected that remittances in Pakistan will grow at about 9 per cent in 2020, totalling about $24 billion. “The negative impact of the COVID-induced global economic slowdown has been somewhat countered by the diversion of remittances from informal to formal channels due to the difficulty of carrying money by hand under travel restrictions as well as the incentives to transfer remittances,” said the report published in the World Bank’s Migration and Development Brief. Citing example, the report titled ‘Phase-II COVID-19 Crisis through a Migration Lens’ noted that Pakistan had introduced a tax incentive in July 2020, whereby withholding tax was exempted from cash withdrawals or the issuance of banking instruments or transfers from a domestic bank account. The tax incentive was capped by the remittance amounts received from abroad into that account in a year.