Fall in remittances

Pakistan has a serious foreign exchange problem. The issue is getting further compounded as there is an earth-shaking disparity in the exchange rate at the banking and open market fora. It has led to visible depleting of reserves as flight of dollars is evident and the incoming remittances have dropped to new lows. The State Bank says remittances sent by overseas Pakistanis have hit an eight-month low at $2.22 billion during the last month, and one of its prime reasons is that people prefer to enjoy a better rate at the open market through Hundi and Hawala. Hands exchange mechanisms are fetching up to Rs240 a dollar, compared to a trailing Rs222 to 225 on official decorum. This by all means reflects the beleaguered stature of macroeconomics that confronts the nation.

A fair evaluation of the economy’s potential must float the rupee around Rs180 to Rs190 a greenback. But that is not the case, as soaring imports, balance of payments issues and a critical crunch in liquidity keep it down and out. The need of the hour for the government is to act on two fronts instantly. One, do away with the Rs14-18 disparity of the rupee at open market and curb down on commercial banks that are making a fortune out of it by inside trading. Two, buoy the confidence of overseas Pakistanis in the economy by further streamlining official channels and doing away with the wedge in exchange rates. The task is easier said than done, as it directly entails the political situation in the country, and is related to stability and trust of investors in the economy.

The 9.1% decrease in inflow of remittances is a warning of sorts. The fact that our largest diaspora in Saudi Arabia and the UAE are losing trust in official channels is an enigma. Receipts from Saudi Arabia and the UAE have slumped by 11.7% and 9.2% respectively in the last four months. At a time when Pakistan is planning to buffer up its reserves through rollover concessions from Beijing and Riyadh, the expatriates should be on board too. The rupee in stampede is in need of being rescued.

Published in The Express Tribune, November 13^th, 2022.

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