Overseas Pakistanis have gradually emerged as main drivers of economic growth in their homeland, as their deposits in foreign currency denominations at local banks have jumped over $2 billion mark under the Roshan Digital Accounts (RDAs), supporting the stability in foreign currency reserves.
“As Pakistanis all over the world celebrated the country’s Independence Day, Roshan Digital Account crosses the historical milestone of $2 billion in deposits,” Pakistan’s central bank said on its official Twitter handle. “A big thanks to overseas Pakistanis for their overwhelming response to the RDA initiative.”
“This is an excellent initiative of the government and the central bank. RDA inflows have helped strengthen the country’s external economy,” BMA Capital Executive Director Saad Hashmey said while talking to The Express Tribune.
“The inflows of $2 billion in 11 months are a very good achievement,” he said adding that stability in value of rupee against the US dollar and other major world currencies would act as the key to achieve many more milestones through RDAs in future. The country attracted the lofty deposits within the first 11 months following the launch of RDA initiative by the State Bank of Pakistan in September 2020. Most of the deposits (about one-third of the total inflows) have been invested in the Naya Pakistan Saving Certificates which were especially designed to give a higher rate of returns to the non-resident Pakistanis.
The inflows have not only supported stability in the foreign exchange reserves but also extended the required support to rupee, he said. The deposits have partly made foreign financing available to Pakistan to pay for increasing imports and repay foreign debt as well.
Apart from RDA, overseas Pakistanis sent the third largest workers’ remittances at $2.71 billion in July 2021, the first month of the current fiscal year 2021-22. The conventional remittances and RDA remittances both increased the country’s capacity to make international payments conveniently and helped the economy grow at a higher run rate. The country’s foreign currency reserves stood at $17.62 billion in the week ended August 6, 2021 compared to around $7 billion about two years ago.
The local currency closed at Rs164.19 against the US dollar in the inter-bank market on Monday compared to around Rs161 about a year ago.
A central bank official said the other day that SBP reserves grew through improvement in the current account deficit instead of foreign borrowing.
The current account deficit reduced to a 10-year low of 0.6% of GDP in FY21 compared 1.7% of GDP in FY20. The net foreign borrowing has remained almost flat, as it is being used to repay the previous foreign debt only, he added. “The inflows through Roshan Digital Accounts (RDAs) are expected to reach around $3.5-4 billion by end of December 2021, considering the inflows have remained over $300 million a month in June and July 2021,” Pak-Kuwait Investment Company Head of Research Samiullah Tariq said the other day.
“The second phase of Raast (a complete indigenised payment system) starting in October would play a pivotal role in encouraging the non-resident Pakistanis to increase the use local banks’ financial products to take care of their family members living in the country remotely,” he said.
The second phase of the digital banking platform would enable overseas Pakistanis to order goods, such as medicines, online for their family members living in the country and pay for them remotely.