Remittances to the country stood at $2.5 billion in October 2023, which is 9.6 percent up from the previous month (Sept-23), and 11.5 percent from the same period last year (Oct-22). However, the overall remittance inflows in 4MFY24 stood 13.3 percent year-on-year lower at $8.8 billion.

The October growth was anticipated as rates have converged in the open market and inter-bank, shifting inflows from remittances from illegal open market to formal banking channels as a result of the ongoing crackdown on smuggling and hoarding of dollars. Recall that the analysis for September remittances highlighted that despite controlled month-on-month growth in remittances during the month, September inflows were ata 5-month high and the flows would likely improve in October and the coming months.

For the last six months, remittances have ranged between $2-2.2 billion. However, the inflows from overseas Pakistanis improved in October and touched a seven-month high with the level of $2.5 billion last seen in Mar-23. The growth has primarily come from the United Arab Emirates and Saudi Arabia, which accounted for around 60 percent to the growth incurred on a month-on-month basis – showing that the crackdown on Hundi and Hawala have been working. Overseas Pakistanis in Saudi Arabia sent the highest remittances followed by the UAE, UK EU and then the USA during Oct-23.

In short, convergence of open market and interbank rates, the crackdown against smugglers and hoarders of foreign exchange as well as the stability in the currency have all contributed to the respite in remittances witnessed in October. With the crackdown continuing and the SBP-mandated structural reforms for the exchange companies, it is expected that the coming months will see a better trend in the monthly inflows. The overall decline for 4MFY24 standing at 13 percent is also better than the decline witnessed in 1QFY24 – which was over 18 percent year-on-year. What could further boost the growth in remittances some stability economically and politically. The announcement of elections in Feb-24 could improve the business and the investor sentiment in the country, which could jump start the share of remittances coming in as investment including the real estate.