KARACHI: Remittances sent by Pakistanis living abroad fell by nearly 11% in the first eight months of the current fiscal year.
However, inflows increased by 5% month on month in February after the government and the State Bank of Pakistan (SBP) uncapped the dollar exchange rate to its real market price of Rs280, up from Rs230 in the last week of January.
The central bank reported on Friday that remittances totaled $17.994 billion from July to February 2022-23, down 10.8 percent from $20.183 billion in the same period last year.
According to the data, inflows increased by 4.9 percent in February to $1.988 billion, up from $1.894 billion in January. The improvement was encouraging, but remittances fell 9.4 percent from $2.196 billion in the same month last year.
However, the market anticipated an increase in remittances in February due to extremely high dollar prices. The expected result of the uncapping of the exchange rate was a sharp depreciation of the rupee, but it changed the trend of inflows.
In February, inflows increased month on month to $2 billion.
Remittances were being sent through illegal channels due to lower dollar prices in interbank and open markets, while the illegal grey market offered higher rates of Rs30 to Rs40 per dollar. In this context, the International Monetary Fund had requested that the government bring the exchange rate in line with the one at the Pakistan-Afghan border.
The removal of the exchange rate ceiling has not only reduced dollar smuggling to Kabul but has also improved dollar supplies in the open market, making it easier for importers to obtain greenbacks on their own.
With the arrival of Ramazan in the last week of this month, the currency market and banks anticipate higher inflows, as overseas Pakistanis typically send 15 to 20% more remittances due to charities, zakat, and increased spending during the holy month.
The SBP data also revealed that, with the exception of the United States, inflows from almost all-important destinations fell during 8MFY23 compared to the same period last year.
Saudi Arabia had the highest remittance inflow of $4.346 billion, but it was down 15.5 percent from the same period last year.
The United Arab Emirates had the second highest inflows at $3.197 billion, but this represented a 15.3 percent decrease from the previous year.
The US had only a 3 percent increase, reaching $1.972 billion during 8MFY23 compared to the same period last year.
In 8MFY23, UK inflows fell 5.7 percent to $2.631 billion, GCC countries 8.9 percent to $2.119 billion, and EU countries 8.6 percent to $2.035 billion.