In a worrisome development, Pakistan has experienced a significant drop inworkers’ remittances when compared year-on-year (YoY).
The latest data from the State Bank of Pakistan (SBP) reveals a 5.34%increase in remittances on a month-on-month (MoM) basis, reaching $2.21billion, as opposed to the previous month’s $2.09 billion. This boost inremittances can be attributed to various factors, such as improvedtransparency and the implementation of stricter measures against illicitcurrency transactions.
These efforts have fostered a more secure and regulated environment forremittance operations. However, on a YoY basis, there has been an 11.3%decline in workers’ remittances for September, compared to the $2.49billion received during the same month last year.
This drop reflects the challenges faced by the Pakistani diaspora and thechanging economic landscape. During this period, the majority ofremittances originated from several source countries.
Saudi Arabia was the leading contributor with $538.16 million, followed bythe UAE with $399.77 million, the U.K. with $311.06 million, EU countrieswith $269.25 million, and the USA with $263.42 million. These sourcenations continue to play a crucial role in supporting Pakistan’s economythrough remittances.
Examining the cumulative data for the first three months of fiscal year2023-24 (3MFY24), Pakistan recorded a total of $6.33 billion inremittances. This figure, while substantial, reflects a 19.85% decline whencompared to the $7.9 billion received during the same period in thepreceding fiscal year (3MFY23).
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This decrease highlights the persisting challenges and fluctuations inremittance patterns. It’s important to highlight that the decrease inremittances in the prior month was primarily attributed to an increasinggap between official and unofficial exchange rates. Many non-residentPakistanis chose to utilize unofficial channels, which offered a morefavorable exchange rate for the dollar, contributing to this decline.
In response to these challenges, the Pakistani authorities, under theleadership of the military, initiated crackdowns against speculators,hoarders, and smugglers to deter illicit outflows of dollars. Consequently,this has resulted in the strengthening of the Pakistani Rupee (PKR) againstthe U.S. Dollar (USD) in the official market.
Additionally, the State Bank of Pakistan (SBP) introduced reforms with theaim of consolidating and transforming various categories of exchangecompanies into a unified category with stricter regulations and highercapital requirements.
These reforms serve to enhance transparency within the remittance industryand bolster regulatory oversight. As part of these measures, SBP suspendedthe authorization of four exchange companies in September, underscoring thecentral bank’s commitment to enforcing regulatory standards and ensuringthe security of remittance transactions.