The worker remittances into the country witnessed a respite in December 2023 as the latest data by the central bank shows that the inflows grew by 13.4 percent year-on-year, and by 5.4 percent on a month-on-month basis to stand at $2.38 billion. The growth in December 2023 resumed the gradual monthly upward growth trend since July 2023 which was interrupted by a slip in November 2023. The positive growth has been due to the crackdown on illegal and informal channels for sending money back home as the volatility of the economy and exchange rate gave rise to the Hundi/Hawala practice in the currency market, which led to a gap in the interbank and open market rates.
However, the overall growth in remittances in 1HFY24 stood in the negative. Remittances in 1HFY24 were down by around 7 percent year-on-year for reasons like weak economy at home as well as abroad including key source countries – in addition to the currency fluctuation.
Where do the remittances go from here? As critical as these inflows are for the country’s economy, the growth is likely to remain rangebound in 2024. The latest word from the World Bank in its Migration and Development Brief for December 2023 is that the remittances may decline by 10 percent and drop below $22 billion in 2024 due to weak economic growth prospects.
There might be some squeeze on inflows coming from the largest source country Sausi Arabia as the latest brief by the WB highlights that despite strong demand for employment in Saudi Arabia, given the upcoming giga-projects, remittances from the kingdom to other countries were down by 13 percent in 1HCY23 on a year-on-year basis. World Bank points out that this could have a negative implication for remittances to Pakistan and North African countries as the decline in remittances from KSA to these countries reflects the post-COVID adjustments as well as the kingdom’s recent policy to allow migrants to bring their families.
The report further highlights that the decline in growth in remittances globally in 2023 versus 2022 was due to a “near collapse in growth” in Saudi Arabia and weak growth in other GCC countries due to oil prices and production drop.
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