DOHA - With worker remittances covering 45% of Pakistan’s import bill, few can deny these inflows form the bedrock of the economy as a reliable source of foreign exchange earnings, a Qatar based media group reported on Sunday.

But the pattern of remittances has undergone a notable change in recent years. For instance, inflows from the United States, which has traditionally been one of the principal sources of remittances, have slowed down remarkably in recent years.

As opposed to 12.9% growth rate in 2013-14, remittances from US increased only 4.8% in 2014-15. More recently, remittances from the United States tallied to $1.1 billion in July-November, which is 1.5% less from the same period of the preceding fiscal year. This is despite the fact that the US economy is finally getting out of the shadow of the 2008 financial crisis with an improved job market.

So why is the Pakistani diaspora in the US not sending as much money back home as its counterparts in other parts of the world, especially the Middle East?

“Probably this slowdown should be seen in the context of narrowing interest rate differential, which is an outcome of normalising monetary policy in the US and an easy policy in Pakistan,” according to the State Bank of Pakistan (SBP) latest annual report. In simple words, the central bank believes that US workers of Pakistani origin are simply holding on to their savings within America instead of remitting them back home.

They are withholding that portion of their savings that they would otherwise send their families for “investment purposes,” the SBP believes.

In the presence of a wide gap between the rates of investment returns in the US and Pakistan, US workers of Pakistani origin would prefer investing their savings in Pakistan until recently something that resulted in healthy annual growth in worker remittances from US for many years.

But with interest rates going up in the United States and coming down in Pakistan, the difference in the average investment returns seems to be narrowing.

This analysis reconciles with empirical findings as well, according to the SBP.

Referring to an international research study carried out in 2011, the SBP said the difference between investment returns in the host country US, in this case and Pakistan is a “highly significant determinant” of remittance growth for Pakistan.

In addition to the US, remittances from UK have also slowed down in recent years, SBP data shows. From 12.9% growth rate in 2013-14, remittances from UK increased only 4.9% in 2014-15.

They amounted to $1 billion in July-November, which is up only 4.4% from the same period of the preceding fiscal year.

But the SBP says the slowdown in remittances from the UK is entirely due to the exchange rate effect. A sharp depreciation of the sterling has resulted in a decrease in the dollar value of remittances from the UK. After adjusting for the exchange rate fluctuation, however, the SBP says remittances from the UK have actually gathered pace. Pakistanis based in foreign countries sent home $18.4 billion in 2014-15, which translated into a year-on-year increase of 16.5%.

Non-resident Pakistanis sent remittances amounting to $8 billion in the first five months of 2015-16, which translates into a year-on-year increase of 7.6%.