Overseas workers’ remittances to Pakistan have dropped by 12.8% YoY to $24.8 billion in the first 11 months of this fiscal year, as per State Bank of Pakistan (SBP) data. This decrease, standing at 10.4% YoY ($2.1 billion) in May, came alongside a 4.4% month-on-month decline. The major contributors were Saudi Arabia, UAE, the UK, and the USA.
Reasons for Decrease in Remittances
Analysts trace this reduction to elevated inflation and economic slowdown in host nations, foreign currency transfers from overseas Pakistanis, and temporary exchange rate adjustments. The gap between interbank and open market exchange rates has also prompted more workers to use illegal methods to send money home, leading to remittances shift to the grey market.
The fall in remittance inflows spells trouble for Pakistan, already grappling with a foreign exchange crunch and delays in bailout loans from the International Monetary Fund (IMF).
Discrepancies in economic strategy emerged between SBP Governor Jameel Ahmad and Finance Minister Ishaq Dar after the monetary policy announcement. Ahmad denied considering bilateral debt restructuring, underscoring the focus on the IMF program, while Dar hinted at ongoing external debt restructuring efforts.
Debt Repayments and Future Projections
The SBP reported the repayment of a portion of the total external repayment amount ($3.6 billion) due this month and plans for rollovers and financing. SBP estimates total debt requirements for the fiscal year 2023-24 to be around $23 billion, funded based on IMF and other considerations.
Falling remittances and a 12% decrease in exports due to weak global demand and domestic economic performance exacerbate Pakistan’s balance of payments issue. Imports were down by 28.4% due to import policy tightening. The current account deficit has dropped significantly, but the balance of payments remains a concern, with a current account deficit target of $6 billion set for the next fiscal year.
