Remittances continue to decline, clock in at $2.1bn in November

The inflow of overseas workers’ remittances continued to decline in Pakistan, clocking in at $2.108 billion in November 2022, a drop of 14.3% on a year-on-year basis.

According to data released by the State Bank of Pakistan (SBP) on Wednesday, the inflow of remittances stood at $2.460 billion in the same month last year. The inflow in November is also the third successive month-on-month decline.

On a month-on-month basis, remittances fell 4.8% as they amounted to $ 2.215 billion in October 2022. On a cumulative basis, the inflow of remittances during the July to November period of the fiscal year 2022-23 stood at $12 billion, 9.6% lower than $13.28 billion in the same period of the previous fiscal year.

Overseas Pakistanis in Saudi Arabia remitted the single largest amount in November 2022 as they sent $498 million during the month. This was 20% lower than the $622 million sent by expatriates in the same month of the previous year.

Remittances from the United Arab Emirates amounted to $378 million during the month, a decline of 20% compared to $475 million in November 2021.

Inflows from the United Kingdom fell 5% as they declined from $314 million in November 2021 to $299 million in October 2022.

Moreover, remittances from the European Union countries dropped 8% as they amounted to $245 million in November 2022. Overseas Pakistanis in the US sent $229.4 million in November 2022, registering a year-on-year decline of 6%.

Earlier, JP Morgan in its report highlighted that remittance inflows into Pakistan have tapered off in recent months i.e. averaged $2.5 billion in Aug-Oct 2022, after rising to an all-time high of $3.1 billion in April, though they still remain elevated compared to pre-pandemic levels, which average $1.7 billion per month in 2015-19.

“We think a key reason is the slower pace of adoption of digital remittance services as borders reopen and international travel normalises.

“Other reasons may include the moderation of oil prices since 2Q22 and the stabilization of the PKR (Pakistani rupee), which might have reduced incentives to remit back Foreign Exchange FX,” said JPMorgan.

“From a longer term perspective, we expect workers’ remittances to resume a gradual uptrend on a steady increase in migrant worker flows, notwithstanding temporary ebbs and flows from the global business cycle,” it said.

Meanwhile, experts in Pakistan attribute the decline to the rising usage of informal channels of remittances, where the prevalence of a ‘grey’ or ‘black’ market offers higher rates than those offered in the formal markets.

The rupee has remained largely stable in the inter-bank market, hovering around the 223-225 level for days, but market talk suggests transactions are occurring at around Rs240-245 in the informal markets.

In a brief note after the remittance data was released, brokerage house Ismail Iqbal Securities Limited also pointed out that a major decline was witnessed in inflows from Saudi Arabia and the UAE.

“These countries are not witnessing economic challenges as such, which indicates that the gap between official and Hawala/Hundi rate is the major factor behind the decline,” stated the note.