Remittance inflows dropped by nearly 5% on a month-on-month basis in November of the fiscal year 2023, a drop that is being attributed by analysts to the rise of “unofficial channels” like hawala and hundi.
According to figures released by the State Bank of Pakistan (SBP), total inflows totalled $2.1 billion in November of FY23, up from $2.21 billion in October. According to the data, inflows fell by 4.8% month on month.
In the same month last year, remittances inflows totalled $2.46 billion. In comparison, inflows fell by 14.3% in November of this year.
The trend of sharp decline has also been observed during the first five months of FY23 compared to the same period last year, with remittance inflows totaling $12 billion this year versus $13.3 billion last year.
Experts believe that the sharp drop in remittance inflows is due to overseas Pakistanis preferring unofficial channels because they offer a much higher exchange rate.
This is evident from the fact that the interbank rate of the US dollar, which is currently at Rs224.70, is not easily available below the Rs240 range.
It is important to note that Pakistan is heavily reliant on remittances to meet its foreign exchange needs because exports barely cover imports.
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In November, The Trade Deficit Increased By 24% Month On Month
According to the Pakistan Bureau of Statistics (PBS), Pakistan’s trade deficit increased by 24% month on month in November.
According to preliminary trade statistics released earlier this month by the PBS, the trade deficit increased to $2.876 billion in November, up from $2.327 billion in October.
According to the report, imports totaled $5.245 billion in November, while exports were only $2.369 billion.
According to the central bank, remittances inflows came primarily from Saudi Arabia ($498 million), the United Arab Emirates ($377.8 million), the United Kingdom ($299.1 million), and the United States ($229.4 million) last month.
Workers’ remittances are a major source of foreign exchange in Pakistan, so they play an important role in the economy.