KARACHI: Workers’ remittances increased 26.2 per cent year on year in January but the overall inflows were down by 3pc in the first 7 months of 2023-24.

The State Bank of Pakistan (SBP) data on Monday showed that the country received $2.397 billion in remittances in January against $1.9bn in the same month of 2023. Month-on-month the inflows edged up by a meagre 0.6pc.

However, the cumulative remittances during July-January were still unable to surpass the total of the previous year in the same period.

The FY23 was considered as the lost year since the remittances fell by $4bn. The government and the currency dealers were sure that this massive decline in remittances was the outcome of the illegal currency business including smuggling.

Inflows in 7MFY24 remain lower than of 7MFY23

A crackdown was launched against the menace which helped to stabilise the exchange rate but inflows remained lower than the last year.

The country received $15.832bn during July-Jan FY24 compared to $16.317bn in the same period of FY23. This $435m decline is a question mark for the policymakers.

Currency experts said the government must identify the reasons for this decline and take preventive measures to arrest further fall as the inflow of remittances is the backbone of the economy. The country’s external account cannot survive without remittances which are higher than the exports of the country.

Bankers said the impact of a large migration of Pakistanis is not visible in the remittances but the consequences of disruption after general elections could prove vital for the inflows.

Bankers believe if the political uncertainty prevails for any longer, the economy will be in deep trouble as inflows would dwindle to an unexpected level.

Currency experts see a sharp decline in foreign direct investment (FDI), which would be visible in February’s numbers. The FDI is not significant in terms of volume but remains a crucial support for the dollar-starved country.

In the first half of the current fiscal year, the country received $862m FDI, which was the lowest in the region.

Poor inflows for FDI and a decline in remittances could destabilise the exchange rate which is considered a semi-managed exchange rate. The SBP has tight control over the imports which drastically reduced the trade deficit and ultimately slashed the current account deficit.

The State Bank’s data showed that the highest remittances were received from Saudi Arabia but still short of last year’s inflows. Pakistanis working in Saudi Arabia sent $3.841bn during 7MFY24, a decline of 3.5pc over the same period last year.

Inflows from the UK and USA were $2.35bn and $1.859bn, while both noted an increase of 0.8pc and 1.6pc, respectively.

Remittances from the UAE declined by 5pc to $2.736bn.

However, the inflows from the European Union (EU) for the first time exceeded that of GCC countries as well as the USA. The remittances from the EU and GCC states were $1.985bn and $1.742bn, respectively, during 7MFY24.

Published in Dawn, February 13th, 2024