Remittances from overseas Pakistanis—considered a key source of revenue for cash-strapped Pakistan—declined by 12.8% year-on-year (July 2022-May 2023), according to data released by the State Bank of Pakistan (SBP).
Per the central bank, overseas Pakistanis remitted $24.8 billion in the first 11 months of the current fiscal year, with monies sent to the country decreasing by 10.4% year-on-year in May at $2.1 billion. At the same time, it said, inflows had declined by 4.4% on a month-on-month basis from April to May, when expatriates remitted $2.2 billion.
The data issued by the SBP showed that inflows in May were primarily received from Saudi Arabia ($524 million), followed by the United Arab Emirates ($335.8 million), the United Kingdom ($306.5 million), and the U.S. ($257.2 million). According to pundits the monthly decline could be attributed to expatriates sending back more money for Eidul Fitr during April. For the year-on-year decline, they said, higher inflation and economic slowdowns in host countries, as well as an increasing trend toward availing non-formal banking channels could be to blame.
Over the past year, as the gap between the open market and interbank exchange rates widened, overseas Pakistanis started utilizing the grey market to get a premium exchange rate. However, in recent weeks, this gap has reduced, with currency exchange dealers claiming this will eventually result in them shifting back to the formal banking channels.
The decline in remittances is particularly worrisome as Pakistan faces a balance-of-payments crisis, with approximately $4 billion in reserves that are barely sufficient to support a month of imports. The country, per the SBP, also has debt servicing requirements of $23 billion for the upcoming fiscal year, and has yet to revive a stalled bailout with the International Monetary Fund, raising concerns over its ability to repay the funds.