If the pace of inflow remained the same, the country might end up with more than $12 billion remittances in the current fiscal.—File Photo

KARACHI: Overseas Pakistanis kept the morale of poor economy high by sending higher than expected remittances as the four months data showed over 23 per cent rise compared to same months last year.

The State Bank reported that the country received $4.315 billion during July-Oct compared to $3.501 billion during the same period of the previous fiscal, a rise of 23.24 per cent.

If the pace of inflow remained the same, the country might end up with more than $12 billion remittances in the current fiscal.

In the wake of rising trade and current account deficits the increased remittances give hope that the country could deal with this situation safely provided the flow of remittances remained intact.

It is also equally important to protect the remittances inflows, particularly when foreign aid and other inflows, including the foreign investments have dried up.

The inflows during the previous month showed the sudden jump if compared with remittances during the month of September. Bankers said the high inflows during October were due to Eidul Azha, which attracted substantial amount of remittances from around the world.

The September proved to be the turning point as it broke the trend of regular inflows of $1 billion per month as the total remained much below the trend during this month.

Except for the month of September Pakistanis remitted over $1 billion in July and August of the current fiscal year. In September remittances stood at $890 million.

In October 2011, an amount of $1.017 billion was sent home by overseas Pakistanis, up 19 per cent, when compared with $855 million received during the same month last year.

However, the most visible data was the high increase in the remittances from Saudi Arabia. During the first 4 months of the current fiscal the remittances were up by 50 per cent to $1.145 billion. It is also the highest amount received during this period from any other country.

Remittances from all significant countries have shown positive improvement during the current fiscal as it rose by 17.5 per cent from UAE, USA 19 per cent, UK 23 per cent, GCC states 17 per cent and European Union 10 per cent.

The monthly average remittances for the July-Oct, 2011 period come out to be $1.078 billion as compared to $875 million during the same period of the last fiscal year.

Despite the significant growth in the remittances, the current account balance seems to need a bigger injection of dollars, particularly due to the widening trade imbalances.

The four-month data shows that trade imbalance rose to $6.87 billion, a rise of 31 per cent compared to the same period last year giving a clear signal the coming months would put more pressure on trade as well as the current account imbalances.

The trade imbalance is the real cause of higher current account deficit. Though the first quarter deficit was limited to minus $1.209 billion yet it was much higher than the same period of last year. Last year, it was minus $597 million in four months, while the same fiscal ended with current account surplus.

The government has yet not come out with a plan or strategy to strengthen the flow of remittances, which has served as backbone of the economy and helped the country to keep a reasonable amount of foreign exchange reserves.

This inflow with higher reserves succeeded to keep the local currency relatively stronger against the dollar.