Still hovering above the $2 billion mark,remittances are depicting a decline. The home remittances decreased by 10.5 percent and 12.3 percent, month-on-month and year-on-year , respectively in September 2022, which does not sound so pleasant during the current economic situation. Not only that, remittance inflows dropped by 6.3 percent in 1QFY23.

Country-wise, remittances showed a decline from key destinations excluding the United State of America that showed a growth of 7 percent year-on-year in 1QFY23. Remittances from Saudi Arabia, the major contributor to remittances in Pakistan also depicted a decline of around 10percent. Inflows from UAE and UK fell by around9 and 4 percent year-on-year respectively during 1QFY23.

While the decline in remittances has been attributed various factors since the openingofthe world post pandemic and the ensuing global economic slowdown, one factor that the market and the currency dealers believe that has affected inflows of remittance in Pakistan in September specifically has been the difference in the US dollar rates in the official and the illegal/grey market. When the local currency was depreciating, thegrey market was offeringmuch higher rates that likely led to higher remittances sent back home through illegal channels and not the formal market. As a result, remittances have seen a decline.

September remittances were at four month low as a time when the market was hoping for a growth in inflows due to the flood situation in the country.However, it must be noted that remittances of $2.4 billion are not a depressing stat. Nonetheless the slowdown is being witnessed; and across the region where Bangladesh also witnessed a significant decline in inflows in September, Sri Lanka reported the highest remittances in Aug-22 followed by a slide increase in Sept-22. How much of the decline was actually due to the illegal channels will be clear in the coming month as the gap in the PKR-USD rates between formal and informal channels have narrowed down to normal range once again.