Home remittances sent by the overseas Pakistanis have
almost been tripled to $1.3 billion in the first quarter of the current
financial year i.e. July-October 2002... Gross home remittances rose to
$1.43 billion in four months to October 2002 from about $529 million in
the comparable period of the previous year.
Gross home remittances include workers remittances,
encashment of foreign currency bearer certificates and foreign exchange
bearer certificates, Hajj remittances by the relatives of the intended
Hajis and remittances from Kuwait-Iraq war affected people.
The unusual rise in the home remittances becoming a
major source of foreign exchange earnings for the country is due to
narrowing gap between the official and the open market exchange rates.
Before the events of September 11 there was a big gap
between the official and open market rates which was naturally a big
temptation for the remitters to use the unofficial channels to get a
better rate of the dollars sent by them. However, the situation
altogether changed as the United States and other countries started
tracking down the outflow of money move closely. This prompted many
overseas Pakistanis to shift part of the money they had put in the safe
havens back to Pakistan through official channels. The golden and silver
cards schemes initiated by the government for those sending money back
home through official channels also helped raise the remittances level.
According to an estimate, the home remittances have shown a growth of
170 per cent in the first four months of the current fiscal year.
During the last week alone, dollar shed about 32
paisa against rupee as a steep fall in forward premium have prompted the
exporters to sell future export proceeds faster than before. The dollar
appetite of the market was further saturated with larger inflows of
foreign currency through home remittances and quicker conversion of
foreign currency deposits into rupee. Dollar has depreciated by 2.7 per
cent against rupee since the beginning of the first quarter of the
current financial year. The surprising change in the rupee-dollar
complexions is reflected today as against altogether different situation
when the then government had freeze foreign currency accounts in
Pakistan. The foreign currency holders were reluctant to convert their
dollars into rupee to such an extent that they had gone to the court
against the decision of the government to convert the foreign currency
accounts into rupee. But today the situation is on the reverse, the
investors who used to consider dollar as the safest haven for investment
are shifting from dollar to rupee.
The fast improving financial strength of the country
reflected in unprecedented growth of foreign exchange which are very
close to $9 billion are expected to cross the mark $10 billion of the
current pace of inflow from external resources sustains during the
remaining part of the financial year.
The international credit rating firms have also
started transmitting positive signals about Pakistan's improved
financial health. Moody's Investors Service has also raised outlook from
Stable to positive on Pakistan's B3 country ceiling for long-term
foreign currency debt on stronger foreign currency reserves and ability
to meet external liabilities. This credit rating agency has said that as
a result of this action, the outlook on the B3 rating of the
government's outstanding Eurobond has been moved to "Positive''
from 'Stable'. Pakistan's strong recovery in external assets relative to
short-term liabilities and the greater likelihood that these assets can
be retained, has warranted an upward shift in the outlook to
"Positive'. This international credit rating agency has pointed out
that an initial build-up in reserves had already been taken into account
in its upgrading of Pakistan's foreign currency ratings to B3 from C-1
in January. Pakistan's foreign currency reserves increased to over $8.6
billion this month on increasing remittances and State Bank buying of
dollars from the market. The agency expects that Pakistan's economy
would continue to grow at a pace similar to that of the last few years,
although an improvement in global demand coupled with greater political
stability, could push growth even higher.
Moody's says that for the longer term, faster growth
and poverty alleviation will depend on the pace of structural reform and
on whether the political environment is stable enough to attract
increase in private investment.
There are positive signals on the investment front
also. During the first four months of the current financial year,
country received about $400 million Foreign Direct Investment showing an
increase of 234 per cent as compared to the corresponding period last
year. In October alone the flow of investment was $229 million, as
compared to$119.6 million DFI in the first four months of the previous
financial year. Optimism calls for the hope that these positive signals
of the economy would sustain in future also especially in the backdrop
of the newly installed political government in Pakistan.