Macro Analysis /
Pakistan

Pakistan Economy: Remittances continue their normal run rate in March

  • Remittances in March clocked in at US$1.89bn, showing a healthy growth of 9% yoy and 4% mom.

  • This is the normal monthly run rate, which may not recur in April due to Covid-19 led economic slowdown globally.

  • C/A balance may however remain in line with recent trend in April due to commensurate decline in oil imports.

Intermarket Securities
10 April 2020

According to the SBP data, remittances in March 2020 clocked in at US$1.89bn, showing a healthy growth of 9% yoy and 4% mom. This is in line with the monthly run rate of US$1.89bn in FY20 so far; even though many countries, including Pakistan, observed a nationwide lockdown at the end of March.

Among the four major contributors of remittances to Pakistan – Saudi Arabia, UAE, USA and UK – trends in March were largely in line with the previous eight months. Flows from the USA have grown at 30% yoy (17% yoy during 9MFY20). For the third consecutive month, flows from the UK have been slowing with an unusual yoy decline in March. About 11% yoy growth in flows from both Saudi Arabia and UAE (accelerated mom) may indicate that Pakistanis abroad may have started sending money for the upcoming Ramadan / Eid season (falling in April-May).

We think flows in April will partly show the negative impact of the Covid-19 pandemic and lockdowns in many countries. The major decline could be seen in flows from the USA and Europe (the epicentres of the outbreak), while there could be a relatively moderate decline in flows from the Middle East – where the dent from lower oil prices and negligible tourism would be compensated for by the Ramadan / Eid related flows, in our view. The latter factor would likely keep flows in May healthy (last May, remittances grew 31% yoy due to the same reason).

In 9MFY20, remittances have grown by a healthy 6% yoy to US$17.02bn. Flows from USA grew the most, by 17% yoy, while there was a 5-6% growth in flows from other major countries.

Given the Goods trade balance in March came in at US$1.49bn (PBS; same as in February 2020), and remittances are up 4% mom, the current account deficit will likely be similar to the level in February (US$210mn). A potentially sharp decline in remittances and exports in April (say, lower by US$500mn each) will partly be offset by near-halving of oil imports (c.US$500mn) and decline in other commodities, in our view.