KARACHI: State Bank of Pakistan (SBP) Governor Ashraf Mahmood Wathra Thursday said that there was absolutely no reason to worry about the noticeable drop in remittances in the month of July.
“There is no reason to panic. Because of Eid, people sent a record amount of money in June while banks were effectively closed for the first 10 days of July. So to get a better picture, one needs to take average of remittances that the country received in June and July,” said Wathra while talking to reporters at the State Bank of Pakistan (SBP).
According to the SBP governor, the press conference was called to dispel the impression in certain section of media that the country may face difficulties in repaying its debt due to sudden decline in remittances.
Pakistan received just $1.3 billion in July 2016, down 20.2% compared to the same month in previous year. The country received remittances amounting to $19.9 billion in 2015-16, up 6.4% from the previous fiscal year. Remittances play a major role in stabilising the country’s external sector, as they make up for almost half of the import bill and cover the deficit in the trade of goods accounts.
“Pakistan has successfully fulfilled its debt commitments in the last few years. With higher foreign reserves, the country is in a much better position to repay its debts in the next four to five years,” he said.
“Pakistan is now in a growth phase. We need to capitalise on the improvement in security situation and energy crisis so that we can attract maximum private sector investment. We need to give employment opportunities to young people, which is only possible by giving confidence to the private sector,” he added.
The SBP officials say due to slowdown in world economic growth, the global remittance market is going through a tough phase. Average world remittances have declined by 2.7% in 2015 while India, Thailand and Sri Lanka are facing a decline in remittance inflows.
Along with Indonesia, Pakistan stands out with about 12% growth in remittance in 2015 compared to 2014. Similar to the past five years, the country has posted strongest growth in remittances that have surpassed their target for fiscal year 2016 and reached almost $20 billion.
Wathra, who was appointed the SBP governor in April 2014 for a period of three years, accepted that Pakistan should continue to look at alternatives like increasing its exports for long-term stability in foreign reserves.
“Political instability is not good for the economic health of any country. In Pakistan’s case, we have seen in the last few decades that political stability has always affected the country’s economy,” he said, when asked whether he expects any political instability in coming months.
Replying to a question, the governor said that the China-Pakistan Economic Corridor (CPEC) is not going to affect Pakistan’s debt repayment schedule in the coming years. “CPEC will also help develop Special Economic Zones (SEZ) that is going to eventually boost exports of the country,” he added.
The SBP officials while giving a detailed presentation on the state of economy said that there was no doomsday scenario as far as the economic health of the country was concerned.
They said that the decline in exports is not just Pakistan-specific. Other regional countries are also witnessing a fall in their exports due to low international oil prices and overall economic slowdown. However, they said Pakistan should continue to look towards new markets to increase its exports.