KARACHI: Remittances from Pakistani workers abroad fell 10 percent to $11 billion in the first five months of the 2023/24 fiscal year, the central bank data showed on Friday, as a weakening rupee discouraged some expatriates from sending money through official channels.
However, the amount of money that overseas Pakistani workers sent home rose to $2.2 billion in November, up 4 percent from last year. The remittance flows dropped by 9 percent month-on-month in November.
The latest remittances data comes as the International Monetary Fund’s executive board will meet on January 11 to consider final approval for the disbursement of the next $700 million tranche from its ongoing loan programme.
Pakistan received $1.2 billion in July from the IMF as the first installment of the $3 billion standby arrangement (SBA). Remittances inflows during November were mainly sourced from Saudi Arabia ($540.3 million), the United Arab Emirates ($409.4 million), the United Kingdom ($341.7 million) and the United States of America ($261.5 million), the SBP said in a statement. November saw a decline in remittances, which had increased in October. This decline could have been caused by the weakening rupee, which encouraged Pakistani expats to send money home through non-banking channels.
During the first two weeks of November, there was pressure on the rupee relative to the dollar. However, a crackdown on illicit foreign exchange activity in the grey and black markets sharply reduced the huge currency rate gap between the interbank market and the grey market, encouraging several Pakistani expats to send money home through official channels.
The crackdown, along with other administrative measures taken by the government and the central bank, strengthened the Pakistani rupee. In September and October, the rupee gained almost 11 percent against the dollar. Therefore, the remittances increased in October. Remittances are declining, which is not good news for Pakistan's balance of payments. Pressure on the nation's foreign exchange reserves is still there due to high debt repayments.
The forex reserves held by the central bank dropped by $237 million to $7.020 billion as of December 1. The country’s total reserves decreased by $286 million to $12.107 billion. By the end of the current fiscal year, Pakistan's forex reserves held by the SBP could total $9 billion, according to estimates from the IMF. The Fund made the concerning prediction that remittances from overseas would drop by $3.5 billion, from an earlier projected target of $32.889 billion to $29.377 billion, for the current fiscal year ending on June 30, 2024, despite the IMF not foreseeing any gap on the external account front. According to the Fund, the oil import cost might increase from $15.3 billion to $17.63 billion annually for the current fiscal year.