KARACHI: The State Bank of Pakistan revealed the country-wise overseas workers’ remittance data for the month of October on Friday. The remittances hit a record low of 2.215 billion dollars for the first time since February 2022. With the exception of a 2 month decline in January and February in 2022, the remittances have not gone below this level since August 2020.
Pakistan is currently going through one of the worst balance of payment crises in its history. In such a situation inflow of foreign capital is determinant to not only our development, but sustenance as well. Owing to a large amount of Human Capital moving out of the country, Pakistan has been historically reliant on foreign remittances as one of its key forex inflows. These remittances have seen a gradual decline since the month of August. The figures have gone down by a total of 9.27% in the current fiscal year, between July to October, as compared to the same time period last year.
Pakistan saw a decline in remittances from workers in all major countries. Including the USA ($15 million), UK ($ 29 million), Saudi Arabia ($ 46.1 million) and UAE ($ 47.3 million). Media reports suggest that this decline is seen due to increase in transfer through illicit means like hawala and hundi. Because of an economic slowdown throughout the world, the gap between dollar rates in the formal and informal markets has widened, encouraging people to send money through informal channels. Since the majority of the decline in remittances is seen from GCC countries, despite economic growth in these countries. The decline can be attributed to informal channels.
If Pakistan is to see economic growth, it has to find a way to curb the informal inflow and outflow of foreign reserves. Despite forex controls in place, an estimated 30 percent of Pakistan exists in “shadow economy”, a huge part of which is foreign trade.
