Remittances decline 25.4pc MoM to $2.3bn in May

KARACHI: Pakistan’s remittances fell by 25.4 percent month-on-month in May, putting more pressure on the external account and rupee that has already hit record lows against the dollar in the current week, the central bank data showed on Friday.

The State Bank of Pakistan (SBP) data showed that the country received $2.3 billion in remittances in May, compared with a record high of $3.1 billion in the previous month.

Remittances saw a decline of 6.9 percent year-on-year in May. These inflows stood at $2.5 billion a year ago.

“At $2.3 billion in May 2022, workers’ remittances have continued to remain above the $2 billion mark since June 2020,” the SBP said in a statement on the same day.

Pakistan’s citizens employed abroad sent fewer remittances home largely reflecting the usual seasonal post-Eid decline and associated long holiday, the SBP explained.

Cumulatively, at $28.4 billion, remittances have grown by 6.3 percent YoY during the first 11 months of this fiscal year, it added.

Remittances in May 2022 were mainly sourced from Saudi Arabia ($542 million), the United Arab Emirates ($435 million), the United Kingdom ($354 million), and the United States of America ($233 million), according to the SBP data.

Pakistan has a large number of citizens who work abroad. Decline in remittances sent by these workers is not a positive sign for the country’s balance of payments.

Foreign exchange inflows under roshan digital accounts (RDA) fell 22.85 percent to $189 million in the month of May.

Pakistan is struggling to contain the ballooning deficits. It is facing a balance of payments crisis with the central bank’s foreign exchange reserves falling to $9.2 billion, enough to cover 1.35 months of import payments, as well as soaring inflation.

The country recorded a current account deficit of $13.8 billion in the 10 months of FY2022 against $543 million a year ago. The surge in the current account gap was attributed to higher import payments amid a spike in global fuel prices and other commodities.

The import and external debt payments along with the lack of potential capital inflows also exerted pressure on the rupee, which dipped to an all-time low of 202.83 on Tuesday.

Finance Minister Miftah Ismail in the budget speech said that the government was targeting a current account deficit of 2.2 percent of GDP for the next fiscal year against the estimated 4.1 percent for FY2022.

This would be achieved by reducing imports to $70 billion in FY2023 versus $76 billion (estimated) in FY2022 and increasing exports to $35 billion, compared with $31.3 billion.

Inflows of remittances are expected to increase to $33.3 billion in FY2023 from an expected $31.1 billion for FY2022.

The government is seeking to unlock funding from the International Monetary Fund (IMF) as soon as possible to bolster the foreign currency reserves as the resumption of the $6 billion bailout package would pave the way for funding from bilateral, multilateral creditors and friendly countries such as China, Saudi Arabia, and the United Arab Emirates.