Remittances slow down to $2.2bn amid rising interest rates globally

• Experts attribute decline to global slowdown.
• Remittances are 15.7% lower than $2.62bn in October 2021.
• Inflows during October were mainly sourced from Saudi Arabia. 

KARACHI: Remittances sent home by overseas Pakistanis in October declined by over 9% — the second successive month-on-month decline — to clock in at $2.2 billion due to the global slowdown and widening rate differential in the open and interbank market.

According to data released by the State Bank of Pakistan (SBP) on Friday, the remittances were 15.7% lower than the $2.62 billion sent home from abroad in the same period of the previous fiscal year.

However, remittances declined by 9% on a year-on-year basis to $9.9 billion in four months (July-October) of the current fiscal year 2022-23.

Speaking to Geo.tv, Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq cited three major reasons behind a decline in inflows:

• Rise in global interest rates diverting dollars
• Higher inflation reduces disposable income
• Gap between official and unofficial exchange rates has

Market experts also attributed the decline to smuggling and higher rates offered in informal and illegal channels as the reasons behind the second consecutive decline.

It should be noted that during this month, the gap in dollar rate widened between the formal and informal markets. As a result, a large chunk of remittances had been channelled towards informal markets through hundi and hawala.

Despite the rupee remaining stable in the interbank market last month, a shortage of dollars and even other currencies was witnessed in the open market.

However, Tariq predicted that with the steps the government is taking, remittances should improve going forward.

Country-wise data

Pakistanis residing in Saudi Arabia remitted the largest amount of $570.5 million in October 2022. However, it was 7.47% lower than the $616.86 million received in September 2022.

Expatriates in the UAE sent home 9.97% less amount as receipts declined from $474.3 million to $427 million.

Remittances from overseas Pakistanis in the UK dropped 9.42% to $278.8 million. They sent $307.8 million in September.

Moreover, remittances from other Gulf Cooperation Council (GCC) countries decreased by 12.64% to $258.3 million and a 10.36% decrease was recorded in inflows from European countries, which clocked in at $232.7 million in the month under review compared to September.