Remittances decline 14pc in November

Published December 15, 2022
Rehan Ahmed
Rehan Ahmed

KARACHI: Remittances sent by overseas Pakistanis declined by 14 per cent in November this year. The inflows fell by 9.6 per cent during the first five months of the current fiscal year (FY23).

The latest data released by the State Bank on Wednesday showed that the remittances kept falling and declined to $2.1 billion in November from $2.5bn during the same month last year. The inflows declined by 5pc compared to $2.215bn in October this year.

During July-Nov FY23, the remittances fell by $1.279bn (9.6pc) to $12bn from $13.286bn during the same period last fiscal year.

Bankers and currency experts have been warning that the artificial low dollar rate in the interbank market could cost the country heavily. The current dollar rate in the interbank market stands at Rs224.71, but the open market offers much higher rate. The worst part of the low interbank dollar rate is the emergence of a very strong grey market which starts attracting the remittances.

Experts warn artificial low interbank dollar rate can cost Pakistan heavily

Currency experts and bankers believe that the low inflows are the direct consequences of a wide gap in dollar rates. The grey market offers Rs255 per dollar, while banks provide Rs224.71 for a dollar.

“The major reason for a decline in remittances is 10 per cent differential in the open market and interbank exchange rates,” said Tahir Abbas, head of research at Arif Habib Limited. He said expats are getting 10pc higher rate for the same amount of remittances sent via unofficial channels, leading to a decline in the official remittance figure.

“Also, exporters are holding back US dollar proceeds amid this widening currency gap. The government needs to tackle this gap on a war footing to aid exports as well as remittances,” he said.

The government and the State Bank are unable to allow a free market mechanism for the exchange rate, particularly in the wake of poor foreign exchange reserves of the central bank.

Though the State Bank governor recently assured with a number of statistics that Pakistan only needs to pay $4.7bn this year and the rest of the dues would be rolled over, the market remained unmoved. Currency experts said only inflows could stabilise the market, while pointing out that remittances depend largely on political stability.

Experts identified some more reasons for the low inflows while keeping the dollar rates gap as focal point. “I find three major reasons: decline in disposable incomes globally due to inflation; better investment avenues globally due to higher interest rates and large gap between interbank and open market dollar rates in Pakistan,” said Samiullah Tariq, head of research and development at Pakistan Kuwait Investment Company.

Former finance minister Miftah Ismail recently said the country needed a free market exchange rate that would help resolve the issues being faced by the government.

Published in Dawn, December 15th, 2022

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Time for dialogue
Updated 24 Jun, 2024

Time for dialogue

If the PML-N and PTI remain mired in mutual acrimony, an ever-widening gap will continue to allow non-political forces to assert themselves.
Property taxes
24 Jun, 2024

Property taxes

ACCORDING to reports in the local media, along with the higher taxes imposed on real estate in the recent budget, ...
Fierce heat
24 Jun, 2024

Fierce heat

CLIMATE change is unfolding as predicted by experts: savage heat, melting glaciers, extreme rainfall, drought, ...
China’s concerns
23 Jun, 2024

China’s concerns

Pakistan has no option but to neutralise militant threat to Chinese projects, as well as address its business and political stability concerns.
War drums
23 Jun, 2024

War drums

If it is foolish enough to launch another war in Lebanon, Tel Aviv will be solely responsible for setting the Middle East on fire.
Balochistan budget
23 Jun, 2024

Balochistan budget

BALOCHISTAN’S Rs955.6bn budget for the fiscal year 2024-25 makes many pledges to the poor citizens of Pakistan’s...