The drop in remittances is $1 billion more than what Islamabad struggled to secure as bailout from the International Monetary Fund (IMF).
Data released by the SBP, the country’s central bank, showed that the month-on-month remittances increased slightly by 4% to $2.183 billion in June, while it witnessed a 22% decline when compared with the $2.8 billion the country received in June 2022, the Dawn newspaper reported.
The country received a total of $27.024 billion in remittances during FY23, against a record $31.278 billion in FY22, a decline of 13.6% or $4.254 billion.
Higher interest rates in grey market
The SBP did not offer any reason for the decline, but analysts said the government’s effort to keep the dollar at lower than actual rates hit the inflows through banking channels.
The government tried to maintain the dollar-rupee parity at Rs 220 in the first half of FY23, which proved counterproductive.
The greenback grossly appreciated in the open market, and resultantly a grey or black market emerged that started offering Rs 20 to Rs 25 per dollar higher rates, badly hitting remittances.
However, under pressure from the IMF, the government uncapped the exchange rate on February 26, and the dollar immediately jumped to Rs 269.
With fluctuations in subsequent months, the greenback reached Rs 299 in the interbank on May 11 but remained in the range of Rs 280-290.
“During the entire fiscal year FY23, the country remained under the grip of severe political and economic uncertainties which practically weakened both the economy and the currency,” said Atif Ahmed, a currency dealer in the interbank market.
“Along with the price difference, high interest rates in the international market have also provided an opportunity for the remitters for earning better returns,” said Samiullah Tariq, head of Research and Development at Pakistan Kuwait Investment Company (Private) Limited.
Biggest sources of remittance
The highest remittance inflow was from Saudi Arabia, but it fell by 16.9% to $6.445 billion in FY23. In percentage terms, remittances from the UAE witnessed a contraction of 20.5% to $4.468 billion.
Remittances from all important destinations noted a decline except the US which recorded a slight growth of 0.1% to $3.090 billion in FY23. The inflows from the UK dipped 9.7% to $4.056 billion.
The inflows from Gulf Cooperation Council (GCC) and European Union (EU) countries fell by 12% and 7% to $3.191 billion and $3.12 billion, respectively, during the outgoing fiscal year, according to the report.
Imran attacks Shehbaz government
Former premier Imran Khan took to Twitter to criticise the government by saying that when former army chief Qamar Javed Bajwa “conspired with PM Shehbaz Sharif and his coterie of looters and money launderers, PTI (Pakistan Tehreek-e-Insaf party) in its last year had increased remittances and exports by $8.7 billion”.
“The imported govt’s policies have caused a loss of $8.5 billion to the economy in last 12 months with a sharp fall in exports and remittances,” he said, adding that coupled with the worst inflation in the country’s history, it has crushed the poor and the middle class, especially the salaried class.
Meanwhile, the GDP growth also declined from 6.1% to 0.3%, with a steep decrease in industrial growth, causing large-scale unemployment, Khan said.
Pakistan’s economy has been in a free fall mode for the last many years, bringing untold pressure on the poor masses in the form of unchecked inflation, making it almost impossible for a vast number of people to make ends meet.
(With inputs from agencies)