Islamabad, Jan 14: The inflows of workers’ remittances sent home by overseas Pakistanis have continued to slow down, plunging to a 31-month low of USD 2 billion in December 2022.
According to the Dawn newspaper, the State Bank of Pakistan (SBP) reported on Friday that the remittances had decreased by 19 per cent to Rs 2.04 billion in December compared to USD 2.52 billion in the same month of the previous year.
The inflows have reduced by 3 per cent in the month compared to USD 2.10 billion received in November 2022.
Cumulatively in the first six months (July-Dec) of the fiscal year 2022-23, workers’ remittances have dropped 11 per cent to USD 14 billion compared to the same period of the last year, the central bank said.
A break-up of the data suggests that overseas Pakistanis living in Saudi Arabia have remitted USD 516 million in December, which was 4 per cent higher that USD 498 million sent in November 2022.
Expatriates dispatched USD 329 million to Pakistan from the UAE in the month, which was 13 per cent lower from USD 378 million sent in the preceding month.
They sent USD 314 million from the UK, 5 per cent more than the previous month’s amount of USD 299 million.
The inflows dropped 5 per cent from other European countries to USD 233 million in December as compared to USD 245 million received in November.
The inflows from the US remained almost flat at USD 231 million in the month compared with USD 229 million in November.
The remittances dropped by 9 per cent from other countries around the world to USD 418 million in December compared with USD 459 million in November.
Cumulatively, in the first half (July-Dec) of FY23, the remittances dropped in the range between 8 per cent and 14 per cent from all the regions except for the US, which managed to improve the dispatches by 2 per cent during the period.
According to Dawn, the straight drop in the inflows for the fourth consecutive month has further hit the country’s forex reserves, increasing its reliance on expensive foreign loans to finance external expenditures.
Ismail Iqbal Securities Head of Research Fahad Rauf told the paper in an interview that a major reason for deceleration in the inflows was that Pakistani expatriates had switched to informal channels to send funds to their families in the country instead of banks.
“The offer of a better price (exchange rate/rupee-dollar parity) by illegal hawala-hundi operators (black market) at Rs 250-260 per dollar, compared with Rs 228 per dollar in the interbank market, has compelled a section of non-resident Pakistanis to send funds through informal channels,” he explained.
Rauf noted that the inflows had remained stable from the Western parts of the world, including the US and UK, which were facing a recession-like situation.
However, the inflows from the single largest workers’ remittances market for Pakistan, i.E, the UAE, have dropped by a significant 13 per cent to USD 329 million in December compared to USD 378 million in the preceding month.
Rauf observed that the drop in the inflows from the UAE via formal channels was apparently seen because of a shift of a section of Pakistani expatriates to informal channels including the illegal hawala/hundi.
The inflows from Western countries have largely remained stable as they comply with the Financial Action Task Force’s (FATF) guidelines.
He recalled that Bangladesh was facing a similar problem a couple of months ago. Its expatriates had shifted to black markets because of the availability of a better price or exchange rate. Bangladesh, however, addressed the issue through increasing the price for workers’ remittances in the formal market.
The drop may impact revival of the stalled International Monetary Fund (IMF) loan programme and the other channels of creditors for dollar-strapped Pakistan. (PTI)
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