KARACHI: The new fiscal year opened with a decline in Pakistani foreign workers’ remittances, which were valued at $2.03 billion in July, the central bank said on Thursday.

The remittances were 19.3 per cent lower compared to $2.51bn in July last year and 7.3pc down compared to $2.187bn in the previous month, i.e. June 2023, according to the State Bank of Pakistan (SBP) data.

The July figure was also the lowest monthly reading since February and lower than the previous fiscal year’s average of $2.25bn. The last time monthly remittances rose year-on-year was in August 2022, the central bank data showed.

In the previous fiscal year (2022-23), the country received $27.03bn in workers’ remittances, down 13.6pc from a year ago. The remittances have declined even though more Pakistani workers have moved abroad. Analysts attribute this to several reasons, primarily political and economic uncertainty.

Pakistanis working abroad sent home $2bn in July, down 19pc; SBP forex reserves drop by $110m

Besides, currency experts and dealers said that the difference in dollar prices in the interbank and open markets and SBP policies had also resulted in an illegal market, diverting significant inflows away from legal channels.

Earlier, with a strict ban on imports, the State Bank allowed importers to arrange dollars to open letters of credit. This was why importers bought dollars from the illegal market at a price above Rs15 to Rs20 per dollar. The higher price also attracted overseas Pakistanis, leading to a drop of $4.25bn in remittances in the previous fiscal year.

Currency experts said the State Bank’s policy had changed as it had asked the banks to arrange dollars to open LCs. However, this is still difficult due to a shortage of dollars.

Analysts said that along with the difference in dollar rates, rising interest rates in the international market have also provided an opportunity to remitters to park their savings there with goods returns.

Both the US and UK central banks — the Fed and the Bank of England — have been gradually increasing interest rates to counter inflation.

Country-wise remittances

In July, the highest amount of remittances ($486.7 million) came from Saudi Arabia, though they were 15.7pc lower compared to the inflows received in July last year.

The highest decline of 31pc was noted from the United Arab Emirates, with inflows of $315m. The other Gulf counties recorded a decline of 18.6pc, as the inflows were limited to $228.3m.

The inflows from the UK declined by 25pc to $305.7m, from the US by 4.1pc to $238m, and by 3.6pc from European Union countries to $283.6m.

SBP reserves

Meanwhile, the SBP’s foreign exchange reserves fell by $110m to $8.04bn during the week ended on Aug 4 because of debt repayments.

Reserves held by the commercial banks dropped over $14m to $5.296bn. The country’s total liquid foreign reserves fell to $13.34bn, down $124.6m from the previous week.

Published in Dawn, August 11th, 2023