Remittances from the UAE to Pakistan increased six per cent in the first half of 2018-19 financial year due to the weakening rupee, better investment opportunities and higher interest rates from Pakistani banks.

According to the State Bank of Pakistan's latest data, remittances from the UAE grew six per cent to $2.29 billion during July-December 2018 compared to $2.16 billion for the same period in the previous year.

The UAE accounted for over one-fifth, or 21.5 per cent, of the total remittances sent to the South Asian country.

From the UAE, most of the remittances flow from Dubai, which contributed $1.58 billion, followed by $692 million from Abu Dhabi, $19.24 million from Sharjah and $2.4 million from other emirates.

There are approximately 1.4 million Pakistanis currently living and working in the UAE. Remittance flow has increased since December 2017 when the previous government of Pakistan Muslim League (N) started devaluing the currency, prompting overseas Pakistanis to remit and invest more in their country. However, the persistent decline in the rupee caused a big surge in inflation, which also prompted Pakistanis to remit more to cater to the financial needs of their families back home. The rupee has been devalued six times since December 2017.

In addition, the victory of the PTI government in elections improved sentiment among overseas Pakistanis and businessmen to invest back in their home country. The Imran Khan-led PTI government will present a second mini-budget on January 23 with key focus on ease of doing business and facilitating trade and industrialisation in the country.

Globally, according to the SBP data, remittances grew 10 per cent to $10.71 billion during July-December 2018 period as compared to $9.74 billion during the same period last year, keeping the South Asian country on track to be very close to its target of $22 billion remittances in the ongoing fiscal year. In the past 5 years, $94 billion were remitted to Pakistan from overseas Pakistanis.

Rajiv Raipancholia, CEO, Orient Exchange, said in early April 2018, the rupee was trading at 31.45 against the UAE dirham and it depreciated to 33.55 by September-end. The rupee weakened 26.5 per cent from January 1 to December 31 last year.

"In percentage terms, the rupee depreciated 7 per cent during April-September 2018 period and this was the main reason for increase in remittances from the UAE. The sudden depreciation of currency attracts more people to remit funds and during these times, it is noticed that consumers also borrow to remit to home country for further savings and investments," he added.

About the remittances trend to Pakistan in future, Raipancholia said it will depend on the employment opportunities and level of savings.

"We may not witness a further surge in remittances in real terms since there seems to be flat growth in savings. Furthermore, depreciation of the rupee will lead to an increase volume of remittance but to a limited extent," he added.

Promoth Manghat, executive director and CEO at Finablr and Group CEO at UAE Exchange, said spike in remittances in the first half of 2018-19 fiscal year can be attributed to overseas Pakistanis who have been incentivised by the weaker rupee to remit more.

"Going forward in 2019, the rupee might see some stabilisation if the government is successful in securing a bailout from the International Monetary Fund. If not, we foresee the rupee depreciating further due to the widening trade deficit and precarious state of foreign exchange reserves. This could in turn further incentivise the Pakistani diaspora, especially high-ticket remitters, to remit more in the coming months," said Manghat.

Muhammad Iqbal Dawood, president, Pakistan Business Council, urged Islamabad and banks to improve, expedite and simplify the process of remitting money from abroad into the UAE, especially when it comes to large amount of transfers.

"If we want to send money to Pakistan, illegal channels are more satisfactory and efficient to remit funds. For example, I bought a property and remitted Rs50 million to Pakistan, the bank delivered funds 70 days after I made the payment here. The banks ask a lot of irrelevant questions. So, firstly, the banks and the government has to make transfer of funds smoother and quicker in order to increase remittances. Due to mistake committed by anyone in the past, these sort of irregularities should be removed," Dawood said.

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