Drop in remittances

Remittances in July have hit a five-month low and are down 8.59% compared to the previous month, and down 7.75% compared to July 2021. However, experts attribute this big drop in remittances to the post-Eid and post-Hajj drop-off, coupled with some other holidays in the Middle East. They say many expats send higher-than-normal remittances ahead of Eid and return to normal levels in subsequent months. Also, several expats have fewer working days due to state-mandated holidays over Eid and Hajj, and even reduced hours due to the weather. This can make a huge difference to hourly workers and people running small shops.

The SBP has also noted these factors, saying that there were only 17 working days in July 2022, compared to 22 a month before and 18 in the corresponding month a year earlier. When averaged against working days, daily remittances were actually 18% higher than the previous month, the central bank said. It is also notable that despite the decline, remittances remain on pace to match or surpass the record $31 billion expats sent home in the previous fiscal year. However, there are other concerning factors at play — the war in Ukraine has not hit purchasing power in the Middle East as hard as it has in many other countries, including Pakistan, EU, UK and US. However, if things change, expats may need to use more money on themselves, reducing the amounts they can save and send back.

This has already been evidenced by slight declines in remittances from western countries, but could be offset by the fact that their economies are still generally strong and unemployment levels are low, meaning that people can generally expect to get better wages as the year progresses. The resurgent rupee might also help encourage higher remittances, since better conversion rates for us mean that expats would have to send more money to send home the same amounts in rupee terms. Some experts have also noted that recent permission for currency exchanges to disburse remittances may also boost the numbers, as it may bring more ‘grey’ remittances into the net.

Published in The Express Tribune, August 21^st, 2022.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.