BOOMING REMITTANCES ON EID-UL-FITRE

PAKISTAN RECEIVES $780.53 IN A MONTH

AMANULLAH BASHAR
Sep 14 - 20, 2009

Overseas Pakistanis remitted $780.53 million just in one month during August on the occasion of Eid-ul-fitre, which is a record in the history of remittances notwithstanding record depreciation of rupee against mighty dollar was another reason for robust inflow of remittances.

The home remittances can be doubled if the policy makers allow two more above the inter bank rates as an incentive to overseas Pakistanis to accelerate flow of home remittances.

Overseas Pakistanis have the potential to support the economy provided they are not made to pay high cost of finances dictated by the international donor agencies including International Monetary Fund (IMF). Loans provided by IMF always carry some strings against the interest of the people.

With incentives, overseas Pakistanis would prefer to send money through legal banking channels instead of using illegal means of Hundi or Hawala which operate quicker than lazy bank workers and pay more than the official channels.

It is an opinion of a senior financial expert that economic interest works more effectively than the feelings of patriotism. If the overseas Pakistanis are offered better incentives on their money sent through legal channels the volume of remittance would cross $20 billion mark during financial year 2010.

Workers remitted a record amount of $780.53 million in August, 2009 as against $592.30 million in the same month of the last fiscal year (August 2008), showing a jump of $188.23 million or 31.78%. The amount of $780.53 million includes $0.52 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

This is the second consecutive record amount remitted in a single month during the current fiscal year 2009-10 (FY10). The previous highest amount remitted in a single month by Pakistani workers was recorded in July 2009, when an amount of $744.85 million was received in the country.

It may be recalled that State Bank of Pakistan, Ministry of Finance, and Ministry of Overseas Pakistanis had undertaken a joint initiative called 'Pakistan Remittance Initiative (PRI)' recently with a view to facilitating the flow of remittances through formal channels. This initiative has started to materialize and remittances through formal channels are showing considerable growth.

PAKISTAN'S LIQUID FOREIGN RESERVES POSITION

The total liquid foreign reserves held by the country stood at $14,243.0 million on 5th September, 2009. The break-up of the foreign reserves position is as under:

i) Foreign reserves held by the State Bank of Pakistan: $10,739.0 million
ii) Net foreign reserves held by banks (other than SBP): $3,504.0 million
iii) Total liquid foreign reserves: $14,243.0 million

During the first two months (July-August) of FY10, overseas Pakistanis sent an amount of $1.525 billion, showing an impressive 25 percent rise when compared with $1.219 billion received in the same period last year. The amount of $1.525 billion includes $0.66 million received through encashment and profit earned on FEBCs and FCBCs.

The monthly average remittances for the period July-August of FY10 turned out to be $762.69 million as compared to $609.76 million during the same corresponding period of the last fiscal year, registering an increase of 25 percent.

The inflow of remittances in the July-August, 2009 period from UAE, USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK, and EU countries amounted to $324.17 million, $316.94 million, $296.44 million, $211.48 million, $148.49 million, and $52.12 million respectively as compared to $201.45 million, $319.84 million, $264.64 million, $206.70 million, $74.82 million, and $32.70 million respectively in the July-August, 2008.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first two months of FY10 amounted to $175.08 million as against $119.30 million in the same period last year.

The inflow of remittances into Pakistan from almost all countries of the world increased last month as compared to August 2008.

As per the breakup, remittances from USA, UAE, Saudi Arabia, GCC countries, UK and EU countries amounted to $166.81 million, $164.85 million, $145.27 million, $103.85 million, $77.26 million, and $26.08 million, respectively as compared to the corresponding receipts from the respective countries during August 2008, i.e. $151.45 million, $101.35 million, $131.38 million, $101.39 million, $32.78 million and $15.63 million. Remittances received from Norway, Switzerland, Australia, Canada, Japan, and other countries during August 2009 amounted to $95.89 million as compared to $58.31 million during August 2008.

TFC OF RS90 BILLION NEXT WEEK TO RESOLVE INTER CORPORATE DEBT

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The much awaited second Term Finance Certificate (TFC) worth Rs90 billion is to be launched next week by the government. The TFC besides addressing inter-corporate debt pending for over two years will be a morale boosting tonic for the power producers and new IPPs in the pipeline.

The objective of launching TFC is to settle outstanding inter-corporate debt on IPPs' books and Rs89billion of the required Rs90-100billion debt which according to informed sources has been arranged with a consortium of local banks.

This financial arrangement under the guidelines of IMF is bound to lend credence to impeding liquidity improvement, where IPPs reliance on Wapda's/government of Pakistan's (GoP) ability to service their dues makes them a play on improving government liquidity.

The liquidity arrangement would be increasing confidence of the private power generating companies on near-term receipt of payment from Wapda following launch of the TFC. This morale boosting tonic debt clearance is also expected to have immediate positive impact on balance sheets of major power producing IPPs besides plugging the holes created more than 2-years ago.

Although there were indication for a 22-26 percent hike electricity tariff from next month yet uncertainty still prevail on implementation of power tariff hikes and rising reliance on expensive furnace oil (FO) based power post targeted expansions in 2010.

Meanwhile TFC issuance to resolve inter-corporate-debt has injected confidence in the private power producers depicted in higher-than-expected dividend payouts for financial year 2009 besides firming up their resolve for capacity expansion to overcome the acute power shortage in the country.