The weaknesses in remittances have been visible over the last year or so the foreign inflows remain tepid and continue to fall. FY24 did not start on a positive note as remittances for July 2023 stood at five-month low and also among the weakest months of 2023.
Remittances during July-23 were down by 7.3 percent month-on-month, while the year-on-year declined stood at 19 percent as per the latest released data by the central bank at $2.03 billion.
Remittances sent home by Pakistanis abroad has tapered off significantly in FY23 to $27 billion – declining by 14 percent year-on-year from over $31 billion. The drop in overall remittances come from a decline in remittance from key host countries, substantial spread between the USD interbank rate and the open market /black market rates.
The decline in remittances is ringing alarm bells amid maturing debt obligation payments. Furthermore, the falling remittances are also eating away the gains made in the current account balance. 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. The declining remittances are worrisome as the market was expecting some stability in the coming months to allow growth in inflows due to improving exchange rates and the IMF program. However, that’s not visible right now.
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