The Dar effect on the exchange rate is for everyone to see. The spread between open and interbank markets has probably never been higher. The slowdown in workers’ remittances is being explained as a direct fallout. There is little denying the incentive is too lucrative for remitters, and the Hundi/Hawala channel should theoretically be on the rise.

That settled, it appears overly simplistic to have illegal channels as the sole or core reason for the slowdown in remittances.

The home remittance in the five months of FY23 has come down 10 percent year-on-year, which is a big deal as Pakistan’s remittance ride has only gone in one direction – that is up, for quite a while.

But there is more than what meets the eye. Remittances in rupees in Jul-Nov FY23 are still higher than 20 percent year-on-year. The net difference between remittance change in USD and PKR at 20 percent is close to the levels seen in 2HFY19 when PKR was losing value against the greenback at a brisk pace.

Remittances in PKR on a smooth curved based on a 12-month moving average (to take care of seasonality) have continued to grow. At Rs500 billion on a 12-month moving average for November 2022, they are still at the highest ever. The growth rate has surely slowed down, but remittances still seem to have held ground in the currency that matters more in the context.

The inflows in PKR have stayed slightly shy of national headline inflation in FY23 to date. This is not a common occurrence, but there certainly has to be an element of elasticity attached. One has to keep in mind that the use cases change with the broader economic outlook as well. Investment (in property) has anecdotally tanked to a multiyear low – a view supported by high-interest rates and a substantial decline in high-frequency data related to the industry. One assumes that the central bank could throw more color on the changes in average ticket size to make more sense of the recent pattern.

At the risk of stating the obvious, don’t forget the remittance flow will always remain a factor of the workforce abroad. It is only in 2022 that the number of workers registered abroad has grown year-on-year, still falling shy of the highs seen in 2015 and 2016. It was in the following years that remittance growth caught steam. Mind you, a sizeable number of jobs landed by the Pakistani workforce in the GCC are short-term. Tie that in with the loss of Covid years, is there a fair chance that the Pakistani workforce abroad is lower today than a couple of years ago?

This is not to discount that the illegal channels today must be flourishing in theory. But the overall remittance flow in PKR terms may suggest the slide is not as drastic as it is made to be.