Pakistan's remittance inflow hits new low

The flow of Pakistani workers’ remittances sent home by expatriates hit a 32-month low, slipping below the $2 billion mark through official channels in the first month of this year.

According to data released by the State Bank of Pakistan (SBP) on Monday, the remittances were recorded at $1.89 billion in January 2023. Remittances are 13 per cent lower than the same month of 2022 and down 10 per cent compared to December 2022.

The low-level inflow has increased the country’s reliance on foreign debt which has already mounted beyond affordability.

Cumulatively in the first seven-months (July-January) of the FY2023, remittances dropped 11 per cent to $16 billion compared to $18 billion in the same period last year.

A major drop of 25-30 per cent was recorded mainly from Saudi Arabia and the United Arab Emirates (UAE), where a majority of Pakistanis (almost 70 per cent of the total of 10 million abroad) are working. Remittance inflow from European countries also witnessed a drop, but saw an improvement from two leading Western countries – the US and the UK.

Surprisingly, the inflows dropped from Middle Eastern countries despite the regional economies being on the rise. Similarly, the inflows improved from Western countries, currently facing recession-like situations. The only difference between the two regions is that Western countries operate strictly in compliance with international laws to send and receive funds.

Experts have anticipated that the inflows will improve in the months to come. The rupee has devalued by 16 per cent in the past two weeks to around Rs270 against the greenback in the interbank market.

Until January 24, the rupee hovered at around Rs225-230/$. Once the government ended its control over the rupee-dollar exchange rate, on the recommendation of the IMF, however, the rupee nosedived. Now market forces are determining the rate considering the US dollar’s demand and supply situation in the market.

With the month of Ramzan around the corner, it is expected that overseas Pakistanis will send a higher amount to their relatives in Pakistan to cope with the high inflation levels.

Historical trends suggest that remittances usually grow in the fasting month of Ramzan and Eid festivals. Ismail Iqbal Securities Head of Research, Fahd Rauf, said in a commentary that “(The remittances) should improve from February.”