Remittances sent home by Pakistanis abroad has tapered off in FY23 to $27 billion – declining by 14 percent year-on-year from over $31 billion. The fall in annual remittances in FY23 come after five years of continuous growth.

Though remittances for June remained above $2 billion mark and witnessed a month-on-month growth of four percent, the flows slumped to $2.2 billion from $2.8 billion a year earlier as per central bank’s data recently released.

The drop in overall remittances for FY23 comes at a time when the country’s economic crisis is at its worst. And the decline in remittance comes from key host countries. During the year, remittances into the country faced significant decline in remittances from the Gulf countries despite better growth prospects in these countries versus the western world. Also the substantial spread between the USD interbank rate and the open market /black market rates along with political and economic instability contributed to the weakening in remittances.

A great portion of the remittances have been coming in from illegal grey channels as the gap between interbank and informal market rate increased, which has played a key role in the decline in remittances from formal channels. Monthly inflows show that the decline in remittances started in September 2022 through February 2023, while the flows improved in March 2023 due Ramzan and Eid flows and some improvement in the exchange rates. Moreover, remittances remained above $2.1 billion during the rest of the monthsof FY23 as Eid ul Azha approached.

When compared to the peer countries, only Pakistan has suffered a decline in remittances of the top 5 countries receiving remittances that include India, Mexico, China, and Philippines.

While remittances in FY23 could not reach the target, market is expecting that the coming months will allow growth in inflows due to improving exchange rate, converging interbank and open market rates, and also the IMF bailout.