Remittances drop 14.3pc as hawala, hundi transactions rise

KARACHI: Workers’ remittances fell 14.3 percent in November compared to the corresponding month last year on the back of inflows through illegal channels such as hawala and hundi, analysts said on Wednesday.

Workers’ remittances decreased to $2.10 billion in the month under review compared to $2.460 billion in the same month of the previous year, data released by the State Bank of Pakistan (SBP) showed on Wednesday.

Workers’ remittances also showed a decline of almost five percent in the month of November compared to October of this financial year, when it stood at $2.215 billion.

The cumulative workers’ remittances in the first five months (July-November) of this financial year also showed major decrease of 9.6 percent compared to the corresponding months of last financial year.

Workers’ remittances totalled $12 billion in the months under review compared to $13.28 billion in the same months of the last financial year.

Remittances have been on the declining side for the last few months, causing problems for the country’s external payment sector. For Pakistan, remittances have been the major source of foreign exchange along with exports, which have also slowed down in the last few months.

Country-wise breakup showed that overseas Pakistanis in Saudi Arabia remitted the single largest amount in November 2022 as they sent $498 million during the month, which was 20 percent lower than $622 million sent by expatriates in the same month of the previous year.

Remittances from Saudi Arabia also indicated 13 percent fall in the five months of the current fiscal.

Worker’s remittances from United Arab Emirates amounted to $378 million during the month, posting a 20 percent decline from $475 million in November 2021. The cumulative remittances from UAE in the first five months also decreased by 11 percent.

United Kingdom inflows fell 5 percent, after declining from $314 million in November 2021 to $299 million in October 2022, and were down by eight percent in July-November period of this fiscal

Remittances from the European Union countries dropped 8 percent as they amounted to $245 million in November 2022 and also posted negative growth of 11 percent in the first five months of this fiscal.

Workers sent home $229.4 million from the US in November 2022, down 6 percent year-on-year. However, in five months, remittances from the US showed a growth of 4 percent against the same months of the fiscal.

Remittances from other countries showed a decline of 14 percent in November 2022, compared the same month last fiscal, and were down by 10 percent in the first five months of this fiscal.

Commenting on the fall in remittances Fahad Rauf, head of research at Ismail Iqbal Securities, said that major decline was witnessed in the remittances coming from Saudi Arabia and UAE.

He noted that these countries were not witnessing economic challenges, which indicated that the gap between official rate of dollar and Hawala/Hundi rate was the major reason behind the decline.