Remittances in December 2022 fell for the fourth consecutive month declining by over three percent month-on-month on Dec-22 and a significant 19 percent year-on-year. The monthly trend shows a fall; and while the figures remained above $2 billion, the year-on-year growth has also been negative. Overall, remittances during 1HFY23 also fell. The decline was over 11 percent year-on-year.

In terms of host countries, remittances from almost all key destinations fell. Remittances from Saudi Arabia fell by 18 percent year-on-year in Dec-22., whereas remittances from UAE fell by 27 percent year-on-year. Foreign exchange sent by residents in EU, UK and the US fell by 8 percent, 19.4 percent and 7 percent year-on-year, respectively. For the first half of FY23, remittances from Saudi Arabia and UAE both fell by 14 percent each, while those from the UK, Europe, and the US fell by 8 percent, 12 percent, and 2 percent, respectively.

While there have been many factors at play for the decline in home remittances, a major factor recently has been the volatile exchange rate. There is a major difference in the interbank, open market and the illegal market rate for the dollar, which is becoming a reason for falling remittances through legal channels as the use of hawala and hundi is providing better rates than the official rate. Many analysts have highlighted that the artificially controlling of the exchange rate has caused a huge difference between the interbank and the open market rate for USD; as a result, people are using the black market and illegal channels to transfer money as they are getting much better rates. What is thus required to stop the fall in remittances through banking channels is closing the gap between the official and informal rates.