Raza Khan

Global economic crisis and use of non-banking channels by Pakistani diaspora for sending money are the major reasons behind the decline in workers’ remittances during last fiscal year (2022-23), experts said. Pakistanis abroad were unable to send home enough money during the last fiscal year as their savings shrunk due to global economic crisis and inflation in their host countries. Pakistani workers’ remittances fell by 13.6% on a year-on-year (YoY) basis to $27.024 billion during FY23 compared to $31.278 billion during FY22, according to the State Bank of Pakistan (SBP). Data shows that remittances dropped to $2.2 billion during June 2023 from $2.8 billion during the same month of the preceding year. Dr Sajid Amin, Deputy Executive Director at Sustainable Development Policy Institute (SDPI), told WealthPK that the main reason behind the decline in remittances, especially from Western countries, was the rising inflation.

“Current economic crunch in the UK, European Union (EU) countries and the United States is a matter of concern for remittances inflows from major destinations,” Dr Amin pointed out. He said that the cost of living for Pakistani diaspora in Europe, the US, and the Gulf countries has gone up as the energy prices soared in recent months, especially after the Ukraine crisis. “Pakistanis abroad are finding it difficult to send more money back home,” Dr Amin said. He added that export of unskilled workforce, specially to the Gulf countries, was not helping much in enhancing remittances. “People who want to go abroad for employment must learn skills to enhance their income there,” he emphasised. Remittances are an important component of Pakistan’s economy, which has seen its foreign exchange reserves drain due to external debt servicing, Dr Amin, said, adding that the country needs remittances to keep the economy afloat.

Dr Ashfaque Hasan, Dean of NUST Business School, National University of Sciences and Technology, said that difference in exchange rate of dollar in interbank and open market was also leading to decline in remittances. “People don’t send their money through banking channel as they get good margin of exchange rates in the open market compared to banks,” he pointed out. Dr Ashfaque suggested that the government must let Pak Rupee adjust to the market. “Exchange rate is a price, and it must be left on the market like other prices,” he said. Dr Ashfaque said the government must act to eliminate the use of grey channels by the people abroad for sending money. “Similar currency exchange rates in banks and the open market will help in this regard,” he observed.

According to the SBP, workers’ remittances from Saudi Arabia, Pakistan’s largest source, also declined by 16.9% during last fiscal year to $6.445 billion from $7.754 billion during the preceding year. Similarly, a 20.5% decline was also recorded in remittances from the United Arab Emirates (UAE). Remittances from the UAE dropped to $4.648 billion during FY23 from $5.846 billion during the preceding year. Remittances from the UK, the largest source in Europe, were recorded at $4.056 billion during the year under review against $4.492 billion during FY22, with a negative growth of 9.7%. Remittances from the EU countries also fell by 7.2% during the last fiscal year to $3.12 billion from $3.361 billion during FY22.

Credit: INP-WealthPk