On Friday, the State Bank of Pakistan released data about the remittances sent home by foreign employees by country for the month of October. For the first time since February 2022, the remittances fell to a record low of $2.215 billion. The amount of remittances has not fallen below this level since August 2020, with the exception of a two-month drop in January and February of 2022.
One of the worst balance of payment crises in Pakistan’s history is now occurring. In such circumstances, the infusion of foreign cash is essential to both our progress and survival. Due to a significant outflow of human capital, Pakistan has historically relied on remittances from abroad as one of its primary sources of foreign currency.
Since the month of August, there has been a gradual decrease in these remittances. In the current fiscal year July through October, the data have decreased overall by 9.27% compared to the same time the previous year.
Remittances to Pakistan from all major nations have decreased. Including contributions from the US ($15 million), the UK ($29 million), Saudi Arabia ($46.1 million), and the UAE ($47.3 million). According to media sources, the growth of transfer through illegal channels like hawala and hundi is to blame for this fall.
People are more likely to transmit money through unofficial channels because of the widening difference between dollar rates in the legal and unofficial markets as a result of a global economic slowdown. Despite economic development in these nations, the GCC countries account for the majority of the reduction in remittances. Informal channels might be held responsible for the deterioration.
Pakistan must find a mechanism to stop the unauthorised entrance and outflow of foreign currency if it wants to experience economic progress. Despite having FX regulations in place, an estimated 30% of Pakistan’s economy is considered to be “shadow,” with international commerce making up a sizable portion of it.