Remittances from Pakistanis living abroad plummeted to a four-month low of $2.44 billion in September 2022.
In September 2022, compared to inflows of $2.72 billion the previous month, inflows decreased by 10.5%, according to a report released on Tuesday by the State Bank of Pakistan (SBP). When compared to the same month last year, when they reached $2.78 billion, the remittances were down 12.3%.
According to experts, who cited SBP Governor Jameel Ahmed, some non-resident Pakistanis chose to transfer remittances through the open market and illegal channels (including Hundi and Hawala) in September of this year because they offered a significantly better exchange rate. The inflows through formal channels suffered as a result.
In comparison to the rate provided by banks for the most of the month, the price of the US dollar was Rs10–12 higher in the open and black markets. According to the central bank, the total amount of remittances declined by 6.3% between July and September of FY23, totaling $7.7 billion.
“The $2.5 billion in remittances from workers in a month is not poor. Instead, it is a good number, according to Fahad Rauf, Head of Research at Ismail Iqbal Securities.
When compared to a significantly higher amount in the preceding month, the figure appears to be low. Rauf stated that Jameel Ahmed attributed the decrease in worker remittances to the shift of a fraction of overseas Pakistanis to unofficial channels due to the availability of a higher rupee-dollar rate there, citing Monday’s analyst briefing given by the SBP governor on the most recent monetary policy statement (MPS).
Remittances from all over the world, including the five key markets of Saudi Arabia, the United Arab Emirates (UAE), the United States, the United Kingdom, and Europe, have slowed down, according to Rauf.
He noted that the “global economic slowdown may partially be the cause of the overall reduction in remittances.”
High inflation readings and worries about a recession in the West may be related to the declining remittances from the US, UK, and Europe. However, the Middle Eastern nations have largely escaped the effects of the global economic crisis. He claimed that the decrease in remittances from Middle Eastern nations indicated that non-resident Pakistanis may have used open and/or illegal marketplaces to send money.
After the authorities launched a crackdown on the unauthorized networks and the spread of rupee-dollar rates between the formal and informal markets shrunk to normal levels, Tahir Abbas, Head of Research at Arif Habib Limited, expressed optimism that the overseas Pakistanis would return to the formal remittance channels in October.
According to him, the remittances in the current fiscal year would total around $30 billion.
Saudi Arabia’s remittances decreased from $691.8 million in August 2022 to $616.6 million in September 2022. They came in at $474.3 million from the UAE. US and UK inflows both fell to $268.1 million and $307.8 million, respectively.