KARACHI: On Friday, the central bank data showed that remittances from Pakistanis working abroad dropped by 8.6 percent to $9.9 billion in the first four months of the current fiscal year.
The country received $10.8 billion in remittances from overseas workers in July–October FY2022. Similarly, in October, expats working in the US, Europe, and the Middle East sent less money home to support their families. In October, these cash transfers fell to $2.2 billion, a 15.7 percent decrease from a year earlier. In October, remittances fell by nine percent month over month.
Remittance flows have decreased through official channels since September, according to analysts, and the effects of global recession on migrant workers have also contributed to this decline.
The depreciation of the local currency against the dollar affected the remittance inflows. “The majority of remittance inflows appear to have moved to grey channels. Due to the favourable rupee/dollar spread in the open and grey markets versus the interbank market, these inflows decreased,” said an analyst.
Analysts had previously predicted that remittance inflows would rise in the months that followed the floods, a tendency that was observed after the floods of FY2011 when remittance inflows rose by 26 percent YoY.
The recent actions taken by the government and SBP, however, may aid in stabilising the rupee in the open and interbank markets, enabling Pakistani expatriates to remit money through banking channels.
The SBP announced that it will start a crack down on illegal foreign exchange operators and speculators across the country. It will team up with the Federal Investigation Agency to take stern action against those engaged in illicit trading forex. This would also help decrease informal remittance inflows.
Remittances help countries narrow current account gaps, stabilise currencies and meet overseas debt payments. Pakistan, which has been experiencing a balance of payment crisis, should be concerned about the declining trend in remittances.
The SBP’s forex reserves have fallen to as low as $8 billion, enough to cover less than six weeks of imports. Low employment rates, primarily driven by recession in the countries that host Pakistani migrants, as well as currency devaluation in remittance-source countries against the US dollar, also contributed to the slowdown in remittances.
The amount of money Pakistani citizens living in Saudi Arabia sent home fell 12 percent, to $2.459 billion, in July-October FY2023, according to SBP figures. Remittances from the United Arab Emirates declined nine percent to $1.889 billion. These inflows from the United Kingdom stood at $1.368 billion, compared with $1.492 billion last year. Remittances from European countries fell 11 percent to $1.061 billion in July-October FY2023. However, the Pakistani diaspora living in the US transferred $1.070 billion in the first four months of this fiscal year, which was seven percent higher compared to $1.001 billion in the corresponding period last year.
In a statement, the SBP said it has established a whistleblower forum for the public to report unauthorised forex activities. The State Bank of Pakistan has established a dedicated email address through which the general public can report any unauthorised foreign exchange activity to the SBP.
The central bank took this move to promote an environment of accountability and integrity, it said in the statement. WhistleBlowing.FX@sbp.org.pk) is an email address that can be used to report any unauthorised activity by an exchange company or where the exchange company fails to provide a system-generated receipt of the currency exchange transaction.
“While reporting an unauthorised foreign exchange activity, the complainant is expected to provide facts and as much specific information and particulars as possible to examine the matter thoroughly,” the SBP said.
“They are also expected to refrain from rumor-mongering, speculation, and false and frivolous allegations or accusations.” The disclosure of identity to utilise this forum is voluntary; however, if disclosed, the identity will be kept confidential. “The public at large is encouraged to be judicious in reporting incidents,” it added.
Further, if a person faces any issue in dealing with exchange companies, he or she may share the concerns at firstname.lastname@example.org. Examples of such issues may include, but are not limited to, the sale or purchase of foreign currency notes by exchange companies issuing receipts that are not system generated, charging exorbitantly high exchange rates over those displayed on the notice board, denying genuine customer requests for the provision of foreign currencies, etc.
Foreign exchange business in Pakistan is regulated by the SBP under the Foreign Exchange Regulation Act of 1947. Under the Act above, the SBP has authorised 26 exchange companies of the “A” category and 20 exchange companies of the “B” category to deal in foreign exchange business, including the sale and purchase of foreign currency notes.