Falling remittances

National cash crunch cannot be addressed until overseas Pakistanis gain enough confidence to provide requisite cushion

Remittances continue to decline at a time when the country is teetering, with foreign currency reserves on the verge of running out. Official figures for January show a 13% year-on-year decline and an almost 10% decline compared to the previous month. Over one-fifth of the total $1.9 billion received came from overseas Pakistanis in Saudi Arabia, while the UK, the UAE and the US were the next three biggest sources. The top four accounted for over 64% of remittances.

Experts have cited several reasons for the decline in remittances, including black market growth created by Finance Minister Ishaq Dar’s disastrous effort to artificially peg the dollar. With that peg gone, analysts hope people will go back to using official channels to send remittances. Other factors include a sharp reduction in the number of Pakistanis going abroad — especially to the Middle East — since the Covid-19 pandemic began. Labour force numbers for the UAE are still only around 130,000, or about 60% of the 211,000 people that went there in 2019 — the last full year before Covid hit. The number actually dipped as low as 80,000 as people returned to Pakistan during the Covid lockdowns, and while the numbers are steadily rising, new immigrants take a while to find their feet and start sending back larger amounts of money.

Meanwhile, record inflation in several developed countries, including the US, the UK and across Europe, means that expats are spending more on keeping themselves afloat and have less money left to send to Pakistan. However, the removal of the dollar peg is expected to be enough to push remittance figures back up, although how far is still up for debate. While the rupee appears to have stabilised — for now — the massive loss of value over the past year or so, coupled with high fluctuations in value, may still cause some people to avoid remitting too much, lest they lose money on the transaction. Unfortunately, the national cash crunch cannot be addressed until overseas Pakistanis gain enough confidence to provide the requisite cushion.

Published in The Express Tribune, February 15^th, 2023.

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