KARACHI, June 15 (Arab News): Pakistani financial experts and currency traders said on Wednesday the 12.8 per cent decline in the country's remittance inflows in the outgoing fiscal year was due to the preference of expatriates to utilize informal channels to send money amid a significant exchange rate disparity between the interbank and open markets.
According to official statistics, Pakistan witnessed a decline of 4.4 per cent in remittance inflow in the last month, which stood at $2.1 billion. The data shared by Pakistan's central bank on Tuesday indicated that the reduction in remittances in May amounted to 10.4 per cent on an annual basis. This is despite the fact that the country needs improved remittance inflows since it desperately needs dollars amid a decline in its official reserves to a dangerously low level of $3.9 billion.
Pakistan received 12.8 per cent less remittances in the outgoing fiscal year beginning in July 2022. The cumulative inflows of $24.8 billion were recorded during the first 11 months of FY23, according to the State Bank of Pakistan (SBP). In absolute terms, remittances have declined by $3.68 billion during the fiscal year compared to the previous year's $28.48 billion inflows.
The major contributors to Pakistan's remittance are Saudi Arabia and the United Arab Emirates (UAE), although the inflows from the kingdom have also declined by 16.3 per cent to $5.9 billion since July 2022, while the inflows from the UAE dropped by over 19 per cent to $4.3 billion, according to the official data.
"The decline in inflows can be attributed primarily to Pakistani expatriates opting for informal channels instead of banks when sending money to their families in the country," said Faizan Munshey, senior consultant at One Investments, Dubai, speaking to Arab News.
"This shift is driven by illegal hawala-hundi operators in the black market offering more favorable exchange rates or rupee-dollar parity, leading a portion of non-resident Pakistanis to choose informal channels for fund transfers."
Currency dealers said the demand in the unofficial market was higher as some importers rushed to arrange for payment in order to get their containers cleared from the country's ports.
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