The balance of payment crisis is at its worst in the country and the remittances are not helping. The remittances from overseas Pakistanis have been falling since the last three months. The foreign inflows have been lower by 9.27 percent year-on-year in 4MFY23.

Though still above the $2 billion mark, remittances declined by 15.7 percent year-on-year in October, and were recorded at the lowest since February at $2.2 billion – a nine-month low. On a month-on-month basis, remittances in October fell by nine percent.

Country-wise, remittances showed a decline from key destinations excluding the United State of America that showed a growth of seven percent year-on-year in 4MFY23. Remittances from Saudi Arabia, the major contributor to remittances in Pakistan also depicted a decline of around 12 percent. Inflows from UAE and UK fell by around9 and 8 percent year-on-year respectively during 4MFY23.

While the decline in remittances has been attributed partly due to the recession in the European and western countries, a significant factor for weakening remittances has been divergence of remittances to grey and illegal channel factors like hawala and hundi. And this has been due to depreciating currency where favourable rupee-dollar spread exists in the open and unofficial markets versus the interbank market. With local currency depreciating, the grey market has been offering much higher rates that likely, which has led to higher remittances sent back home through illegal channels and not the formal market. As a result, remittances have seen a decline for the past two months specifically.