In a worrisome development, Pakistan has experienced a significant drop in workers' 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 $2.21 billion, as opposed to the previous month's $2.09 billion. This boost in remittances can be attributed to various factors, such as improved transparency and the implementation of stricter measures against illicit currency transactions.
These efforts have fostered a more secure and regulated environment for remittance operations. However, on a YoY basis, there has been an 11.3% decline in workers' remittances for September, compared to the $2.49 billion received during the same month last year.
This drop reflects the challenges faced by the Pakistani diaspora and the changing economic landscape. During this period, the majority of remittances originated from several source countries.
Saudi Arabia was the leading contributor with $538.16 million, followed by the UAE with $399.77 million, the U.K. with $311.06 million, EU countries with $269.25 million, and the USA with $263.42 million. These source nations continue to play a crucial role in supporting Pakistan's economy through remittances.
Examining the cumulative data for the first three months of fiscal year 2023-24 (3MFY24), Pakistan recorded a total of $6.33 billion in remittances. This figure, while substantial, reflects a 19.85% decline when compared to the $7.9 billion received during the same period in the preceding fiscal year (3MFY23).
This decrease highlights the persisting challenges and fluctuations in remittance patterns. It's important to highlight that the decrease in remittances in the prior month was primarily attributed to an increasing gap between official and unofficial exchange rates. Many non-resident Pakistanis chose to utilize unofficial channels, which offered a more favorable exchange rate for the dollar, contributing to this decline.
In response to these challenges, the Pakistani authorities, under the leadership 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) against the U.S. Dollar (USD) in the official market.
Additionally, the State Bank of Pakistan (SBP) introduced reforms with the aim of consolidating and transforming various categories of exchange companies into a unified category with stricter regulations and higher capital requirements.
These reforms serve to enhance transparency within the remittance industry and bolster regulatory oversight. As part of these measures, SBP suspended the authorization of four exchange companies in September, underscoring the central bank's commitment to enforcing regulatory standards and ensuring the security of remittance transactions.