Remittances swell as UAE dirham surges up to 45 percent

Dubai: United Arab Emirates expatriates, especially from subcontinent and Europe, seem to be having good global slowdown, with their home currencies plunging by as much as 45% against UAE dirham in past four years, cushioning rise in cost of living within the country and boosting remittances. Pakistan Rupee PKR, which hit all-time low last week, is now down over 45% since beginning of 2008, India Rupee INR is down by more than 33%, British Pound is down more than a quarter, Bangladeshi Taka down more than 12%, Euro down almost 9% in same period, Emirates 247 reported on Monday.

Six Gulf Cooperation Council GCC states account for $48 billion, or more than half (53%) of South Asia’s remittances, which are estimated to reach $90 billion in 2011 (up from $82 billion in 2010). GCC also accounts for more than a quarter (28%) of all remittances received by Middle East & North Africa region, estimated at $36 billion for 2011 (up from $35bln in 2010). Remittances from GCC states to Bangladesh & Pakistan (where GCC countries account for 60% or more of overall remittance inflows) grew by 8 & 31% respectively in first three quarters of 2011 on a year-on-year basis.

PKR hit all-time low of 24.35 against dollar backed UAE dirham last week, fuelling a surge in remittances from Pakistani nationals in UAE, elsewhere in the Gulf and across the world. PKR has lost almost half its value in past four years, and is now down more than 45% since beginning of 2008, when it was trading at PKR16.75 against one UAE dirham on January 1, 2008. PKR ended last week’s session at PKR24.32 versus Dh1, up more than 6% in six months on dollar’s strength against a basket of global currencies, including Euro & British pound, Emirates 247 said quoting a World Bank report.

INR lost about a third of its value against UAE dirham since 2008, when it traded at INR10.72 against Dh1 on January 1, 2008. It too hit lifetime lows last week, and currently trading at INR13.90 versus Dh1, up 16% in past four months. “Indian rupee steadily appreciated (by about 15%) against US dollar between November 2008 & June 2011, but had more than reversed gains by November. Anecdotal reports from money transfer companies suggest remittances from GCC states surged in third and fourth quarters of 2011 because of weak rupee,” World Bank report said. British pound, on other hand, has lost more than a quarter of its value (27.35%) since beginning of 2008, and is up 7% in last seven months, trading at £0.1745 against Dh1 (£1= Dh5.73).

Rise in dollar’s strength has led to a massive surge in remittances to developing countries this year. World Bank maintains that officially recorded remittance flows to developing countries are expected to reach an estimated $351 billion in 2011, up 8% over last year, and 14% over year before. “Depreciation of currencies of some large receiving countries (including Mexico, India & Bangladesh) created incentives to send remittances to take advantage of ‘sale effect’ on local currency assets.”

“For first time since global financial crisis, remittance flows to all six developing regions rose in 2011,” report added. Remittances to developing nations declined from $324 billion in 2008 to $307 billion in 2009 due to impact of global recession and liquidity crunch. “Following this rebound in 2011, growth of remittance flows to developing countries is expected to continue at a rate of 78% annually to reach $441 billion by 2014. Worldwide remittance flows, including those to high-income countries, are expected to exceed $590 billion by 2014,” it added.

With 2011 remittances estimated at $58 billion by non-resident Indians (NRIs) across the world, India emerged as the largest recipient of foreign remittances, followed by China ($57bn), Mexico ($24bn) & Philippines ($23bn). Other large recipients in US dollar terms include Pakistan, Bangladesh, Nigeria, Vietnam, Egypt & Lebanon, WB report added.

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